Correlation Between Altair Engineering and BII Railway

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

By analyzing existing cross correlation between Altair Engineering and BII Railway Transportation, you can compare the effects of market volatilities on Altair Engineering and BII Railway 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 BII Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altair Engineering and BII Railway.

Diversification Opportunities for Altair Engineering and BII Railway

0.21

Correlation Coefficient

Altair Engineering  BII Railway

Modest diversification

The 3 months correlation between Altair and BII is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering and BII Railway Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BII Railway Transpor 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 BII Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BII Railway Transpor has no effect on the direction of Altair Engineering i.e., Altair Engineering and BII Railway go up and down completely randomly.

Pair Corralation between Altair Engineering and BII Railway

Assuming the 90 days horizon Altair Engineering is expected to under-perform the BII Railway. But the stock apears to be less risky and, when comparing its historical volatility, Altair Engineering is 2.37 times less risky than BII Railway. The stock trades about -0.07 of its potential returns per unit of risk. The BII Railway Transportation is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.80  in BII Railway Transportation on December 21, 2024 and sell it today you would earn a total of  0.10  from holding BII Railway Transportation or generate 3.57% return on investment over 90 days.

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

Altair Engineering  vs.  BII Railway Transportation

Altair Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Altair Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Altair Engineering is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

BII Railway Transpor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BII Railway Transportation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BII Railway is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Altair Engineering and BII Railway

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

The idea behind Altair Engineering and BII Railway Transportation 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.