Correlation Between Kellogg and Altair Engineering

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

Diversification Opportunities for Kellogg and Altair Engineering

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between Kellogg and Altair is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Kellogg Company and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and Kellogg 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 Kellogg Company 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 Kellogg i.e., Kellogg and Altair Engineering go up and down completely randomly.

Pair Corralation between Kellogg and Altair Engineering

Taking into account the 90-day investment horizon Kellogg Company is expected to generate 0.58 times more return on investment than Altair Engineering. However, Kellogg Company is 1.73 times less risky than Altair Engineering. It trades about 0.07 of its potential returns per unit of risk. Altair Engineering is currently generating about -0.05 per unit of risk. If you would invest  5,999  in Kellogg Company on September 5, 2022 and sell it today you would earn a total of  1,384  from holding Kellogg Company or generate 23.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Kellogg Company  vs.  Altair Engineering

 Performance (%) 
       Timeline  
Kellogg Company 
Kellogg Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Kellogg Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, Kellogg is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Kellogg Price Channel

Altair Engineering 
Altair Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Altair Engineering are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Altair Engineering is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Altair Price Channel

Kellogg and Altair Engineering Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kellogg and Altair Engineering

The main advantage of trading using opposite Kellogg and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kellogg 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.
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The idea behind Kellogg Company 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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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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