Correlation Between Microsoft and Altair Engineering
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Altair Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Altair Engineering, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Altair Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Altair Engineering.
Diversification Opportunities for Microsoft and Altair Engineering
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Altair is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Altair Engineering go up and down completely randomly.
Pair Corralation between Microsoft and Altair Engineering
Given the investment horizon of 90 days Microsoft is expected to generate 1.47 times less return on investment than Altair Engineering. But when comparing it to its historical volatility, Microsoft is 1.95 times less risky than Altair Engineering. It trades about 0.14 of its potential returns per unit of risk. Altair Engineering is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 6,052 in Altair Engineering on January 20, 2024 and sell it today you would earn a total of 2,025 from holding Altair Engineering or generate 33.46% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 99.19% |
Values | Daily Returns |
Microsoft vs. Altair Engineering
Performance |
Timeline |
Microsoft |
Altair Engineering |
Microsoft and Altair Engineering Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and Altair Engineering
The main advantage of trading using opposite Microsoft and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Cloudflare |
Altair Engineering vs. Evertec | Altair Engineering vs. CSG Systems International | Altair Engineering vs. Radware | Altair Engineering vs. NetScout Systems |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
Other Complementary Tools
Share Portfolio Track or share privately all of your investments from the convenience of any device | |
Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |