Correlation Between Altair Engineering and Sanyo Chemical

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

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

Diversification Opportunities for Altair Engineering and Sanyo Chemical

-0.76

Correlation Coefficient

Altair Engineering  Sanyo Chemical

Pay attention - limited upside

The 3 months correlation between Altair and Sanyo is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering and Sanyo Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanyo Chemical Industries 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 Sanyo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanyo Chemical Industries has no effect on the direction of Altair Engineering i.e., Altair Engineering and Sanyo Chemical go up and down completely randomly.

Pair Corralation between Altair Engineering and Sanyo Chemical

Assuming the 90 days horizon Altair Engineering is expected to generate 1.8 times more return on investment than Sanyo Chemical. However, Altair Engineering is 1.8 times more volatile than Sanyo Chemical Industries. It trades about 0.23 of its potential returns per unit of risk. Sanyo Chemical Industries is currently generating about -0.02 per unit of risk. If you would invest  7,700  in Altair Engineering on September 5, 2024 and sell it today you would earn a total of  2,300  from holding Altair Engineering or generate 29.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Altair Engineering  vs.  Sanyo Chemical Industries

Altair Engineering

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Altair Engineering are ranked lower than 18 (%) 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.

Sanyo Chemical Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanyo Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sanyo Chemical is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Altair Engineering and Sanyo Chemical

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

The idea behind Altair Engineering and Sanyo Chemical Industries 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.