Correlation Between Vmware and Altair Engineering

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

Diversification Opportunities for Vmware and Altair Engineering

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Vmware and Altair is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vmware Inc and Altair Engineering Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and Vmware 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 Vmware Inc 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 Vmware i.e., Vmware and Altair Engineering go up and down completely randomly.

Pair Corralation between Vmware and Altair Engineering

Considering the 90-day investment horizon Vmware Inc is expected to generate 1.18 times more return on investment than Altair Engineering. However, Vmware is 1.18 times more volatile than Altair Engineering. It trades about 0.02 of its potential returns per unit of risk. Altair Engineering is currently generating about -0.05 per unit of risk. If you would invest  11,105  in Vmware Inc on July 7, 2022 and sell it today you would earn a total of  192.00  from holding Vmware Inc or generate 1.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Vmware Inc  vs.  Altair Engineering Inc

 Performance (%) 
       Timeline  
Vmware Inc 
Vmware Performance
0 of 100
Over the last 90 days Vmware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Vmware is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Vmware Price Channel

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 latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Altair Price Channel

Vmware and Altair Engineering Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vmware and Altair Engineering

The main advantage of trading using opposite Vmware and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vmware 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 Vmware Inc 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 Commodity Channel Index module to use Commodity Channel Index to analyze current equity momentum.

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