Correlation Between COVIVIO HOTELS and Align Technology

Can any of the company-specific risk be diversified away by investing in both COVIVIO HOTELS and Align Technology 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 COVIVIO HOTELS and Align Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COVIVIO HOTELS INH and Align Technology, you can compare the effects of market volatilities on COVIVIO HOTELS and Align Technology 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 COVIVIO HOTELS with a short position of Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of COVIVIO HOTELS and Align Technology.

Diversification Opportunities for COVIVIO HOTELS and Align Technology

-0.3

Correlation Coefficient

COVIVIO HOTELS  Align Technology

Very good diversification

The 3 months correlation between COVIVIO and Align is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding COVIVIO HOTELS INH and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and COVIVIO HOTELS 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 COVIVIO HOTELS INH are associated (or correlated) with Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of COVIVIO HOTELS i.e., COVIVIO HOTELS and Align Technology go up and down completely randomly.

Pair Corralation between COVIVIO HOTELS and Align Technology

Assuming the 90 days horizon COVIVIO HOTELS INH is expected to under-perform the Align Technology. But the stock apears to be less risky and, when comparing its historical volatility, COVIVIO HOTELS INH is 1.05 times less risky than Align Technology. The stock trades about -0.16 of its potential returns per unit of risk. The Align Technology is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  19,875  in Align Technology on October 23, 2024 and sell it today you would earn a total of  1,905  from holding Align Technology or generate 9.58% return on investment over 90 days.

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

COVIVIO HOTELS INH  vs.  Align Technology

COVIVIO HOTELS INH

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in COVIVIO HOTELS INH are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, COVIVIO HOTELS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Align Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Align Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COVIVIO HOTELS and Align Technology

The main advantage of trading using opposite COVIVIO HOTELS and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COVIVIO HOTELS position performs unexpectedly, Align Technology 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 Align Technology will offset losses from the drop in Align Technology's long position.

The idea behind COVIVIO HOTELS INH and Align Technology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.