Correlation Between Pentair PLC and Altair Engineering

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

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

Diversification Opportunities for Pentair PLC and Altair Engineering

0.57

Correlation Coefficient

Pentair PLC  Altair Engineering

Very weak diversification

The 3 months correlation between Pentair and Altair is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and Pentair PLC 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 Pentair PLC 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 Pentair PLC i.e., Pentair PLC and Altair Engineering go up and down completely randomly.

Pair Corralation between Pentair PLC and Altair Engineering

Considering the 90-day investment horizon Pentair PLC is expected to under-perform the Altair Engineering. In addition to that, Pentair PLC is 1.99 times more volatile than Altair Engineering. It trades about -0.34 of its total potential returns per unit of risk. Altair Engineering is currently generating about 0.24 per unit of volatility. If you would invest  10,683  in Altair Engineering on October 9, 2024 and sell it today you would earn a total of  308.00  from holding Altair Engineering or generate 2.88% return on investment over 90 days.

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

Pentair PLC  vs.  Altair Engineering

Pentair PLC

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Pentair PLC is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Altair Engineering

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Altair Engineering are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Altair Engineering reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pentair PLC and Altair Engineering

The main advantage of trading using opposite Pentair PLC and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair PLC 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 Pentair PLC 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .