Correlation Between Align Technology and Truist Financial

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

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

Diversification Opportunities for Align Technology and Truist Financial

0.18

Correlation Coefficient

Align Technology  Truist Financial

Average diversification

The 3 months correlation between Align and Truist is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial 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 Truist Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truist Financial has no effect on the direction of Align Technology i.e., Align Technology and Truist Financial go up and down completely randomly.

Pair Corralation between Align Technology and Truist Financial

Assuming the 90 days trading horizon Align Technology is expected to under-perform the Truist Financial. But the stock apears to be less risky and, when comparing its historical volatility, Align Technology is 1.04 times less risky than Truist Financial. The stock trades about -0.24 of its potential returns per unit of risk. The Truist Financial is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  25,985  in Truist Financial on December 24, 2024 and sell it today you would lose (2,548) from holding Truist Financial or give up 9.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Align Technology  vs.  Truist Financial

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.

Truist Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Align Technology and Truist Financial

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

The idea behind Align Technology and Truist Financial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.