Correlation Between BII Railway and Altair Engineering

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

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

Diversification Opportunities for BII Railway and Altair Engineering

-0.68

Correlation Coefficient

BII Railway  Altair Engineering

Excellent diversification

The 3 months correlation between BII and Altair is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and BII Railway 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 BII Railway Transportation 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 BII Railway i.e., BII Railway and Altair Engineering go up and down completely randomly.

Pair Corralation between BII Railway and Altair Engineering

Assuming the 90 days horizon BII Railway is expected to generate 1.59 times less return on investment than Altair Engineering. In addition to that, BII Railway is 2.45 times more volatile than Altair Engineering. It trades about 0.09 of its total potential returns per unit of risk. Altair Engineering is currently generating about 0.35 per unit of volatility. If you would invest  9,650  in Altair Engineering on October 7, 2024 and sell it today you would earn a total of  950.00  from holding Altair Engineering or generate 9.84% return on investment over 90 days.

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

BII Railway Transportation  vs.  Altair Engineering

BII Railway Transpor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BII Railway Transportation 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Altair Engineering

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Altair Engineering are ranked lower than 18 (%) 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 BII Railway and Altair Engineering

The main advantage of trading using opposite BII Railway and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway 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 BII Railway Transportation 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.