Correlation Between Altair Engineering and Norwegian Air

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

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

Diversification Opportunities for Altair Engineering and Norwegian Air

-0.35

Correlation Coefficient

Altair Engineering  Norwegian Air

Very good diversification

The 3 months correlation between Altair and Norwegian is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering and Norwegian Air Shuttle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Air Shuttle 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 Norwegian Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwegian Air Shuttle has no effect on the direction of Altair Engineering i.e., Altair Engineering and Norwegian Air go up and down completely randomly.

Pair Corralation between Altair Engineering and Norwegian Air

Assuming the 90 days horizon Altair Engineering is expected to generate 1.7 times less return on investment than Norwegian Air. But when comparing it to its historical volatility, Altair Engineering is 4.71 times less risky than Norwegian Air. It trades about 0.19 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  91.00  in Norwegian Air Shuttle on December 2, 2024 and sell it today you would earn a total of  9.00  from holding Norwegian Air Shuttle or generate 9.89% return on investment over 90 days.

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

Altair Engineering  vs.  Norwegian Air Shuttle

Altair Engineering

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Altair Engineering are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Altair Engineering may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Norwegian Air Shuttle

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Norwegian Air Shuttle are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Norwegian Air may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Altair Engineering and Norwegian Air

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

The idea behind Altair Engineering and Norwegian Air Shuttle 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.