Correlation Between Altair Engineering and WESTERN DIGITAL

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

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

Diversification Opportunities for Altair Engineering and WESTERN DIGITAL

0.03

Correlation Coefficient

Altair Engineering  WESTERN DIGITAL

Significant diversification

The 3 months correlation between Altair and WESTERN is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering and WESTERN DIGITAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN DIGITAL 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 WESTERN DIGITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN DIGITAL has no effect on the direction of Altair Engineering i.e., Altair Engineering and WESTERN DIGITAL go up and down completely randomly.

Pair Corralation between Altair Engineering and WESTERN DIGITAL

Assuming the 90 days horizon Altair Engineering is expected to generate 0.66 times more return on investment than WESTERN DIGITAL. However, Altair Engineering is 1.52 times less risky than WESTERN DIGITAL. It trades about 0.22 of its potential returns per unit of risk. WESTERN DIGITAL is currently generating about 0.06 per unit of risk. If you would invest  8,650  in Altair Engineering on October 10, 2024 and sell it today you would earn a total of  1,950  from holding Altair Engineering or generate 22.54% return on investment over 90 days.

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

Altair Engineering  vs.  WESTERN DIGITAL

Altair Engineering

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Altair Engineering are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Altair Engineering reported solid returns over the last few months and may actually be approaching a breakup point.

WESTERN DIGITAL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WESTERN DIGITAL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, WESTERN DIGITAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Altair Engineering and WESTERN DIGITAL

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

The idea behind Altair Engineering and WESTERN DIGITAL 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.