Correlation Between Nike and Altair Engineering

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

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

Diversification Opportunities for Nike and Altair Engineering

0.51

Correlation Coefficient

Nike  Altair Engineering

Very weak diversification

The 3 months correlation between Nike and Altair is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and Nike 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 Nike Inc 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 Nike i.e., Nike and Altair Engineering go up and down completely randomly.

Pair Corralation between Nike and Altair Engineering

Considering the 90-day investment horizon Nike Inc is expected to generate 0.95 times more return on investment than Altair Engineering. However, Nike Inc is 1.06 times less risky than Altair Engineering. It trades about 0.08 of its potential returns per unit of risk. Altair Engineering is currently generating about -0.06 per unit of risk. If you would invest  9,258  in Nike Inc on January 26, 2024 and sell it today you would earn a total of  206.00  from holding Nike Inc or generate 2.23% return on investment over 90 days.

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

Nike Inc  vs.  Altair Engineering

Nike Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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

Pair Trading with Nike and Altair Engineering

The main advantage of trading using opposite Nike and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike 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 Nike Inc 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.