Correlation Between GBS Software and Altair Engineering

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

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

Diversification Opportunities for GBS Software and Altair Engineering

-0.17

Correlation Coefficient

GBS Software  Altair Engineering

Good diversification

The 3 months correlation between GBS and Altair is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding GBS Software AG and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and GBS Software 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 GBS Software AG 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 GBS Software i.e., GBS Software and Altair Engineering go up and down completely randomly.

Pair Corralation between GBS Software and Altair Engineering

Assuming the 90 days trading horizon GBS Software AG is expected to generate 3.67 times more return on investment than Altair Engineering. However, GBS Software is 3.67 times more volatile than Altair Engineering. It trades about 0.18 of its potential returns per unit of risk. Altair Engineering is currently generating about 0.44 per unit of risk. If you would invest  262.00  in GBS Software AG on October 9, 2024 and sell it today you would earn a total of  18.00  from holding GBS Software AG or generate 6.87% return on investment over 90 days.

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

GBS Software AG  vs.  Altair Engineering

GBS Software AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GBS Software AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GBS Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 unsteady basic indicators, Altair Engineering reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GBS Software and Altair Engineering

The main advantage of trading using opposite GBS Software and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GBS Software 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 GBS Software AG 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..