Can any of the company-specific risk be diversified away by investing in both Ark Restaurants 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 Ark Restaurants and Altair Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ark Restaurants Corp and Altair Engineering, you can compare the effects of market volatilities on Ark Restaurants 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 Ark Restaurants with a short position of Altair Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ark Restaurants and Altair Engineering.
Diversification Opportunities for Ark Restaurants and Altair Engineering
The 3 months correlation between Ark and Altair is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ark Restaurants Corp and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and Ark Restaurants 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 Ark Restaurants Corp 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 Ark Restaurants i.e., Ark Restaurants and Altair Engineering go up and down completely randomly.
Pair Corralation between Ark Restaurants and Altair Engineering
Given the investment horizon of 90 days Ark Restaurants Corp is expected to under-perform the Altair Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Ark Restaurants Corp is 1.07 times less risky than Altair Engineering. The stock trades about -0.04 of its potential returns per unit of risk. The Altair Engineering is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,695 in Altair Engineering on July 2, 2023 and sell it today you would earn a total of 561.00 from holding Altair Engineering or generate 9.85% return on investment over 90 days.
Over the last 90 days Ark Restaurants Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in October 2023. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.
Over the last 90 days Altair Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in October 2023. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.
Ark Restaurants and Altair Engineering Volatility Contrast
Predicted Return Density
Pair Trading with Ark Restaurants and Altair Engineering
The main advantage of trading using opposite Ark Restaurants and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ark Restaurants 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 Ark Restaurants Corp 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.
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 ETF Directory module to find actively traded Exchange Traded Funds (ETF) from around the world.
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