Correlation Between Altair Engineering and MongoDB

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

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

Diversification Opportunities for Altair Engineering and MongoDB

0.45

Correlation Coefficient

Altair Engineering MongoDB

Very weak diversification

The 3 months correlation between Altair and MongoDB is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering and MongoDB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MongoDB 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 MongoDB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MongoDB has no effect on the direction of Altair Engineering i.e., Altair Engineering and MongoDB go up and down completely randomly.

Pair Corralation between Altair Engineering and MongoDB

Given the investment horizon of 90 days Altair Engineering is expected to generate 3.58 times less return on investment than MongoDB. But when comparing it to its historical volatility, Altair Engineering is 1.64 times less risky than MongoDB. It trades about 0.24 of its potential returns per unit of risk. MongoDB is currently generating about 0.53 of returns per unit of risk over similar time horizon. If you would invest  21,799  in MongoDB on March 3, 2023 and sell it today you would earn a total of  7,580  from holding MongoDB or generate 34.77% return on investment over 90 days.

Altair Engineering  vs.  MongoDB

Altair Engineering

Altair Performance

9 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Altair Engineering are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Altair Engineering may actually be approaching a critical reversion point that can send shares even higher in July 2023.

MongoDB

MongoDB Performance

11 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in MongoDB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental indicators, MongoDB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Altair Engineering and MongoDB

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

The idea behind Altair Engineering and MongoDB 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.