Correlation Between Altair Engineering and Japan Post

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

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

Diversification Opportunities for Altair Engineering and Japan Post

-0.55

Correlation Coefficient

Altair Engineering  Japan Post

Excellent diversification

The 3 months correlation between Altair and Japan is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering and Japan Post Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Post Insurance and Altair Engineering 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 Altair Engineering are associated (or correlated) with Japan Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Post Insurance has no effect on the direction of Altair Engineering i.e., Altair Engineering and Japan Post go up and down completely randomly.

Pair Corralation between Altair Engineering and Japan Post

Assuming the 90 days horizon Altair Engineering is expected to generate 0.5 times more return on investment than Japan Post. However, Altair Engineering is 1.98 times less risky than Japan Post. It trades about 0.08 of its potential returns per unit of risk. Japan Post Insurance is currently generating about -0.07 per unit of risk. If you would invest  10,000  in Altair Engineering on December 6, 2024 and sell it today you would earn a total of  300.00  from holding Altair Engineering or generate 3.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Altair Engineering  vs.  Japan Post Insurance

Altair Engineering

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Altair Engineering are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Altair Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Japan Post Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Japan Post Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Japan Post is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Altair Engineering and Japan Post

The main advantage of trading using opposite Altair Engineering and Japan Post positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altair Engineering position performs unexpectedly, Japan Post 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 Japan Post will offset losses from the drop in Japan Post's long position.

The idea behind Altair Engineering and Japan Post Insurance 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.

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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.