Correlation Between Altair Engineering and CyberArk Software

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

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

Diversification Opportunities for Altair Engineering and CyberArk Software

0.08

Correlation Coefficient

Altair Engineering  CyberArk Software

Significant diversification

The 3 months correlation between Altair and CyberArk is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering and CyberArk Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CyberArk Software 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 CyberArk Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CyberArk Software has no effect on the direction of Altair Engineering i.e., Altair Engineering and CyberArk Software go up and down completely randomly.

Pair Corralation between Altair Engineering and CyberArk Software

Given the investment horizon of 90 days Altair Engineering is expected to generate 0.96 times more return on investment than CyberArk Software. However, Altair Engineering is 1.04 times less risky than CyberArk Software. It trades about -0.02 of its potential returns per unit of risk. CyberArk Software is currently generating about -0.23 per unit of risk. If you would invest  8,437  in Altair Engineering on January 25, 2024 and sell it today you would lose (59.00) from holding Altair Engineering or give up 0.7% of portfolio value over 90 days.

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

Altair Engineering  vs.  CyberArk Software

Altair Engineering

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Altair Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Altair Engineering is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

CyberArk Software

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Altair Engineering and CyberArk Software

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

The idea behind Altair Engineering and CyberArk Software 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.