Correlation Between Altair Engineering and Magna International

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

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

Diversification Opportunities for Altair Engineering and Magna International

0.61

Correlation Coefficient

Altair Engineering  Magna International

Poor diversification

The 3 months correlation between Altair and Magna is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Altair Engineering i.e., Altair Engineering and Magna International go up and down completely randomly.

Pair Corralation between Altair Engineering and Magna International

Assuming the 90 days horizon Altair Engineering is expected to generate 0.76 times more return on investment than Magna International. However, Altair Engineering is 1.31 times less risky than Magna International. It trades about 0.22 of its potential returns per unit of risk. Magna International is currently generating about 0.08 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	Significant
Accuracy	100.0%
Values	Daily Returns

Altair Engineering  vs.  Magna International

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.

Magna International

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Magna International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Magna International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Altair Engineering and Magna International

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

The idea behind Altair Engineering and Magna International 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.