Correlation Between Align Technology and Alphaville

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

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

Diversification Opportunities for Align Technology and Alphaville

-0.42

Correlation Coefficient

Align Technology  Alphaville

Very good diversification

The 3 months correlation between Align and Alphaville is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Alphaville SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphaville SA 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 Alphaville. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphaville SA has no effect on the direction of Align Technology i.e., Align Technology and Alphaville go up and down completely randomly.

Pair Corralation between Align Technology and Alphaville

Assuming the 90 days trading horizon Align Technology is expected to generate 0.64 times more return on investment than Alphaville. However, Align Technology is 1.56 times less risky than Alphaville. It trades about 0.13 of its potential returns per unit of risk. Alphaville SA is currently generating about -0.17 per unit of risk. If you would invest  31,801  in Align Technology on September 13, 2024 and sell it today you would earn a total of  4,044  from holding Align Technology or generate 12.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Align Technology  vs.  Alphaville SA

Align Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Align Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Alphaville SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alphaville SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Align Technology and Alphaville

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

The idea behind Align Technology and Alphaville SA 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 the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.