Correlation Between Western Copper and Altair Engineering

Can any of the company-specific risk be diversified away by investing in both Western Copper 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 Western Copper and Altair Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Copper and and Altair Engineering, you can compare the effects of market volatilities on Western Copper 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 Western Copper with a short position of Altair Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Copper and Altair Engineering.

Diversification Opportunities for Western Copper and Altair Engineering

-0.48

Correlation Coefficient

Western Copper  Altair Engineering

Very good diversification

The 3 months correlation between Western and Altair is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and Western Copper 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 Western Copper and 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 Western Copper i.e., Western Copper and Altair Engineering go up and down completely randomly.

Pair Corralation between Western Copper and Altair Engineering

Assuming the 90 days trading horizon Western Copper is expected to generate 1.47 times less return on investment than Altair Engineering. In addition to that, Western Copper is 5.05 times more volatile than Altair Engineering. It trades about 0.05 of its total potential returns per unit of risk. Altair Engineering is currently generating about 0.39 per unit of volatility. If you would invest  9,500  in Altair Engineering on October 6, 2024 and sell it today you would earn a total of  1,100  from holding Altair Engineering or generate 11.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Western Copper and  vs.  Altair Engineering

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Altair Engineering

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Altair Engineering are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Altair Engineering reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Copper and Altair Engineering

The main advantage of trading using opposite Western Copper and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Copper 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.

The idea behind Western Copper and and Altair Engineering pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.