Correlation Between China Resources and Altair Engineering

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

By analyzing existing cross correlation between China Resources Beer and Altair Engineering, you can compare the effects of market volatilities on China Resources and Altair Engineering 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 China Resources with a short position of Altair Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Resources and Altair Engineering.

Diversification Opportunities for China Resources and Altair Engineering

-0.56

Correlation Coefficient

China Resources  Altair Engineering

Excellent diversification

The 3 months correlation between China and Altair is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding China Resources Beer and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and China Resources 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 China Resources Beer are associated (or correlated) with Altair Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altair Engineering has no effect on the direction of China Resources i.e., China Resources and Altair Engineering go up and down completely randomly.

Pair Corralation between China Resources and Altair Engineering

Assuming the 90 days horizon China Resources Beer is expected to under-perform the Altair Engineering. In addition to that, China Resources is 1.49 times more volatile than Altair Engineering. It trades about -0.01 of its total potential returns per unit of risk. Altair Engineering is currently generating about 0.09 per unit of volatility. If you would invest  4,480  in Altair Engineering on September 29, 2024 and sell it today you would earn a total of  5,920  from holding Altair Engineering or generate 132.14% return on investment over 90 days.

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

China Resources Beer  vs.  Altair Engineering

China Resources Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Beer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Altair Engineering

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Altair Engineering are ranked lower than 14 (%) 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.

Pair Trading with China Resources and Altair Engineering

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

The idea behind China Resources Beer and Altair Engineering 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..