Correlation Between Altair Engineering and ULTRA CLEAN

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

By analyzing existing cross correlation between Altair Engineering and ULTRA CLEAN HLDGS, you can compare the effects of market volatilities on Altair Engineering and ULTRA CLEAN 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 ULTRA CLEAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altair Engineering and ULTRA CLEAN.

Diversification Opportunities for Altair Engineering and ULTRA CLEAN

0.23

Correlation Coefficient

Altair Engineering  ULTRA CLEAN

Modest diversification

The 3 months correlation between Altair and ULTRA is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering and ULTRA CLEAN HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ULTRA CLEAN HLDGS 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 ULTRA CLEAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ULTRA CLEAN HLDGS has no effect on the direction of Altair Engineering i.e., Altair Engineering and ULTRA CLEAN go up and down completely randomly.

Pair Corralation between Altair Engineering and ULTRA CLEAN

Assuming the 90 days horizon Altair Engineering is expected to generate 1.16 times less return on investment than ULTRA CLEAN. But when comparing it to its historical volatility, Altair Engineering is 1.97 times less risky than ULTRA CLEAN. It trades about 0.17 of its potential returns per unit of risk. ULTRA CLEAN HLDGS is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,040  in ULTRA CLEAN HLDGS on September 20, 2024 and sell it today you would earn a total of  640.00  from holding ULTRA CLEAN HLDGS or generate 21.05% return on investment over 90 days.

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

Altair Engineering  vs.  ULTRA CLEAN HLDGS

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.

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, ULTRA CLEAN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Altair Engineering and ULTRA CLEAN

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

The idea behind Altair Engineering and ULTRA CLEAN HLDGS 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.