Correlation Between Microchip Technology and Altair Engineering
Can any of the company-specific risk be diversified away by investing in both Microchip Technology and Altair Engineering at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Microchip Technology and Altair Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microchip Technology Incorporated and Altair Engineering, you can compare the effects of market volatilities on Microchip Technology and Altair Engineering and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Microchip Technology with a short position of Altair Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microchip Technology and Altair Engineering.
Diversification Opportunities for Microchip Technology and Altair Engineering
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microchip and Altair is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Microchip Technology Incorpora and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and Microchip Technology is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Microchip Technology Incorporated are associated (or correlated) with Altair Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altair Engineering has no effect on the direction of Microchip Technology i.e., Microchip Technology and Altair Engineering go up and down completely randomly.
Pair Corralation between Microchip Technology and Altair Engineering
Assuming the 90 days horizon Microchip Technology Incorporated is expected to under-perform the Altair Engineering. In addition to that, Microchip Technology is 7.12 times more volatile than Altair Engineering. It trades about -0.18 of its total potential returns per unit of risk. Altair Engineering is currently generating about -0.09 per unit of volatility. If you would invest 10,500 in Altair Engineering on January 14, 2025 and sell it today you would lose (200.00) from holding Altair Engineering or give up 1.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 72.09% |
| Values | Daily Returns |
Microchip Technology Incorpora vs. Altair Engineering
Performance |
| Timeline |
| Microchip Technology |
| Altair Engineering |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Microchip Technology and Altair Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microchip Technology and Altair Engineering
The main advantage of trading using opposite Microchip Technology and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microchip Technology position performs unexpectedly, Altair Engineering can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Altair Engineering will offset losses from the drop in Altair Engineering's long position.| Microchip Technology vs. De Grey Mining | Microchip Technology vs. China Datang | Microchip Technology vs. Stewart Information Services | Microchip Technology vs. CN DATANG C |
| Altair Engineering vs. CHRYSALIS INVESTMENTS LTD | Altair Engineering vs. Scottish Mortgage Investment | Altair Engineering vs. Chesapeake Utilities | Altair Engineering vs. Keck Seng Investments |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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