Correlation Between Altair Engineering and Telkom Indonesia

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

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

Diversification Opportunities for Altair Engineering and Telkom Indonesia

-0.7

Correlation Coefficient

Altair Engineering  Telkom Indonesia

Excellent diversification

The 3 months correlation between Altair and Telkom is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering and Telkom Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom Indonesia Tbk and Altair Engineering 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 Altair Engineering are associated (or correlated) with Telkom Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom Indonesia Tbk has no effect on the direction of Altair Engineering i.e., Altair Engineering and Telkom Indonesia go up and down completely randomly.

Pair Corralation between Altair Engineering and Telkom Indonesia

Assuming the 90 days horizon Altair Engineering is expected to generate 0.34 times more return on investment than Telkom Indonesia. However, Altair Engineering is 2.91 times less risky than Telkom Indonesia. It trades about 0.17 of its potential returns per unit of risk. Telkom Indonesia Tbk is currently generating about 0.01 per unit of risk. If you would invest  8,150  in Altair Engineering on August 31, 2024 and sell it today you would earn a total of  1,850  from holding Altair Engineering or generate 22.7% return on investment over 90 days.

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

Altair Engineering  vs.  Telkom Indonesia Tbk

Altair Engineering

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Altair Engineering are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Altair Engineering reported solid returns over the last few months and may actually be approaching a breakup point.

Telkom Indonesia Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom Indonesia Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Telkom Indonesia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Altair Engineering and Telkom Indonesia

The main advantage of trading using opposite Altair Engineering and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altair Engineering position performs unexpectedly, Telkom Indonesia 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 Telkom Indonesia will offset losses from the drop in Telkom Indonesia's long position.

The idea behind Altair Engineering and Telkom Indonesia Tbk 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.