Correlation Between Altair Engineering and Geely Automobile

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

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

Diversification Opportunities for Altair Engineering and Geely Automobile

0.85

Correlation Coefficient

Altair Engineering  Geely Automobile

Very poor diversification

The 3 months correlation between Altair and Geely is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering and Geely Automobile Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geely Automobile Holdings 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 Geely Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geely Automobile Holdings has no effect on the direction of Altair Engineering i.e., Altair Engineering and Geely Automobile go up and down completely randomly.

Pair Corralation between Altair Engineering and Geely Automobile

Assuming the 90 days horizon Altair Engineering is expected to generate 0.44 times more return on investment than Geely Automobile. However, Altair Engineering is 2.3 times less risky than Geely Automobile. It trades about 0.22 of its potential returns per unit of risk. Geely Automobile Holdings is currently generating about 0.07 per unit of risk. If you would invest  8,450  in Altair Engineering on October 5, 2024 and sell it today you would earn a total of  1,950  from holding Altair Engineering or generate 23.08% return on investment over 90 days.

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

Altair Engineering  vs.  Geely Automobile Holdings

Altair Engineering

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Altair Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Altair Engineering reported solid returns over the last few months and may actually be approaching a breakup point.

Geely Automobile Holdings

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Geely Automobile Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Geely Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Altair Engineering and Geely Automobile

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

The idea behind Altair Engineering and Geely Automobile Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.