Correlation Between Robinhood Markets and Altair Engineering

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

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

Diversification Opportunities for Robinhood Markets and Altair Engineering

-0.59

Correlation Coefficient

Robinhood Markets  Altair Engineering

Excellent diversification

The 3 months correlation between Robinhood and Altair is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Robinhood Markets and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and Robinhood Markets 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 Robinhood Markets 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 Robinhood Markets i.e., Robinhood Markets and Altair Engineering go up and down completely randomly.

Pair Corralation between Robinhood Markets and Altair Engineering

Given the investment horizon of 90 days Robinhood Markets is expected to under-perform the Altair Engineering. In addition to that, Robinhood Markets is 1.79 times more volatile than Altair Engineering. It trades about -0.13 of its total potential returns per unit of risk. Altair Engineering is currently generating about -0.02 per unit of volatility. 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Robinhood Markets  vs.  Altair Engineering

Robinhood Markets

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Robinhood Markets are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Robinhood Markets exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Robinhood Markets and Altair Engineering

The main advantage of trading using opposite Robinhood Markets and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Robinhood Markets 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 Robinhood Markets 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.