Correlation Between National Retail and Altair Engineering

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

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

Diversification Opportunities for National Retail and Altair Engineering

-0.53

Correlation Coefficient

National Retail  Altair Engineering

Excellent diversification

The 3 months correlation between National and Altair is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and Altair Engineering go up and down completely randomly.

Pair Corralation between National Retail and Altair Engineering

Assuming the 90 days trading horizon National Retail is expected to generate 16.44 times less return on investment than Altair Engineering. But when comparing it to its historical volatility, National Retail Properties is 1.25 times less risky than Altair Engineering. It trades about 0.01 of its potential returns per unit of risk. Altair Engineering is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  8,150  in Altair Engineering on September 2, 2024 and sell it today you would earn a total of  1,800  from holding Altair Engineering or generate 22.09% return on investment over 90 days.

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

National Retail Properties  vs.  Altair Engineering

National Retail Prop

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Retail Properties are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, National Retail is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with National Retail and Altair Engineering

The main advantage of trading using opposite National Retail and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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 National Retail Properties 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.