Correlation Between CSG Systems and Altair Engineering

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

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

Diversification Opportunities for CSG Systems and Altair Engineering

0.24

Correlation Coefficient

CSG Systems  Altair Engineering

Modest diversification

The 3 months correlation between CSG and Altair is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding CSG Systems International and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and CSG Systems 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 CSG Systems International 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 CSG Systems i.e., CSG Systems and Altair Engineering go up and down completely randomly.

Pair Corralation between CSG Systems and Altair Engineering

Given the investment horizon of 90 days CSG Systems International is expected to under-perform the Altair Engineering. But the stock apears to be less risky and, when comparing its historical volatility, CSG Systems International is 1.17 times less risky than Altair Engineering. The stock trades about -0.01 of its potential returns per unit of risk. The Altair Engineering is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,374  in Altair Engineering on January 25, 2024 and sell it today you would earn a total of  3,004  from holding Altair Engineering or generate 55.9% return on investment over 90 days.

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

CSG Systems International  vs.  Altair Engineering

CSG Systems International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSG Systems International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, CSG Systems is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Altair Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CSG Systems and Altair Engineering

The main advantage of trading using opposite CSG Systems and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSG Systems 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 CSG Systems International 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.