Correlation Between PENN NATL and Altair Engineering

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

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

Diversification Opportunities for PENN NATL and Altair Engineering

0.73

Correlation Coefficient

PENN NATL  Altair Engineering

Poor diversification

The 3 months correlation between PENN and Altair is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and PENN NATL 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 PENN NATL GAMING 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 PENN NATL i.e., PENN NATL and Altair Engineering go up and down completely randomly.

Pair Corralation between PENN NATL and Altair Engineering

Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the Altair Engineering. In addition to that, PENN NATL is 5.1 times more volatile than Altair Engineering. It trades about -0.13 of its total potential returns per unit of risk. Altair Engineering is currently generating about 0.31 per unit of volatility. If you would invest  10,000  in Altair Engineering on September 26, 2024 and sell it today you would earn a total of  400.00  from holding Altair Engineering or generate 4.0% return on investment over 90 days.

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

PENN NATL GAMING  vs.  Altair Engineering

PENN NATL GAMING

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, PENN NATL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Altair Engineering

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Altair Engineering are ranked lower than 15 (%) 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 PENN NATL and Altair Engineering

The main advantage of trading using opposite PENN NATL and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL 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 PENN NATL GAMING 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.