Correlation Between Altair Engineering and Adobe Systems

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Can any of the company-specific risk be diversified away by investing in both Altair Engineering and Adobe Systems 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 Adobe Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altair Engineering and Adobe Systems, you can compare the effects of market volatilities on Altair Engineering and Adobe Systems 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 Adobe Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altair Engineering and Adobe Systems.

Diversification Opportunities for Altair Engineering and Adobe Systems

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Altair and Adobe is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering Inc and Adobe Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Systems 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 Adobe Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Systems has no effect on the direction of Altair Engineering i.e., Altair Engineering and Adobe Systems go up and down completely randomly.

Pair Corralation between Altair Engineering and Adobe Systems

Given the investment horizon of 90 days Altair Engineering is expected to generate 1.12 times more return on investment than Adobe Systems. However, Altair Engineering is 1.12 times more volatile than Adobe Systems. It trades about -0.08 of its potential returns per unit of risk. Adobe Systems is currently generating about -0.27 per unit of risk. If you would invest  5,494  in Altair Engineering on April 6, 2022 and sell it today you would lose (287.00)  from holding Altair Engineering or give up 5.22% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Altair Engineering Inc  vs.  Adobe Systems

 Performance (%) 
      Timeline 
Altair Engineering 
Altair Performance
0 of 100
Over the last 90 days Altair Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in August 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Altair Price Channel

Adobe Systems 
Adobe Performance
0 of 100
Over the last 90 days Adobe Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in August 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Structure and Payout Changes

Last Split Factor
2:1
Ex Dividend Date
2005-03-24
Last Split Date
2005-05-24

Adobe Price Channel

Altair Engineering and Adobe Systems Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Altair Engineering and Adobe Systems

The main advantage of trading using opposite Altair Engineering and Adobe Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altair Engineering position performs unexpectedly, Adobe Systems 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 Adobe Systems will offset losses from the drop in Adobe Systems' long position.
The idea behind Altair Engineering and Adobe Systems 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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