Correlation Between Align Technology and Applied Materials,

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

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

Diversification Opportunities for Align Technology and Applied Materials,

0.81

Correlation Coefficient

Align Technology  Applied Materials,

Very poor diversification

The 3 months correlation between Align and Applied is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Applied Materials, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials, and Align Technology 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 Align Technology are associated (or correlated) with Applied Materials,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials, has no effect on the direction of Align Technology i.e., Align Technology and Applied Materials, go up and down completely randomly.

Pair Corralation between Align Technology and Applied Materials,

Assuming the 90 days trading horizon Align Technology is expected to under-perform the Applied Materials,. But the stock apears to be less risky and, when comparing its historical volatility, Align Technology is 1.55 times less risky than Applied Materials,. The stock trades about -0.3 of its potential returns per unit of risk. The Applied Materials, is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  10,382  in Applied Materials, on December 24, 2024 and sell it today you would lose (1,742) from holding Applied Materials, or give up 16.78% of portfolio value over 90 days.

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

Align Technology  vs.  Applied Materials,

Align Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Align Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Applied Materials,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Materials, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Align Technology and Applied Materials,

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

The idea behind Align Technology and Applied Materials, 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.