Correlation Between Align Technology and FIEI3F

Can any of the company-specific risk be diversified away by investing in both Align Technology and FIEI3F 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 FIEI3F into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Align Technology and FIEI3F, you can compare the effects of market volatilities on Align Technology and FIEI3F 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 FIEI3F. Check out your portfolio center. Please also check ongoing floating volatility patterns of Align Technology and FIEI3F.

Diversification Opportunities for Align Technology and FIEI3F

-0.54

Correlation Coefficient

Align Technology  FIEI3F

Excellent diversification

The 3 months correlation between Align and FIEI3F is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and FIEI3F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIEI3F 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 FIEI3F. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIEI3F has no effect on the direction of Align Technology i.e., Align Technology and FIEI3F go up and down completely randomly.

Pair Corralation between Align Technology and FIEI3F

Assuming the 90 days trading horizon Align Technology is expected to under-perform the FIEI3F. But the stock apears to be less risky and, when comparing its historical volatility, Align Technology is 6.99 times less risky than FIEI3F. The stock trades about -0.29 of its potential returns per unit of risk. The FIEI3F is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  848.00  in FIEI3F on December 23, 2024 and sell it today you would lose (55.00) from holding FIEI3F or give up 6.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	25.0%
Values	Daily Returns

Align Technology  vs.  FIEI3F

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 uncertain 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.

FIEI3F

Risk-Adjusted Performance

Weak

Over the last 90 days FIEI3F has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat uncertain technical and fundamental indicators, FIEI3F sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Align Technology and FIEI3F

The main advantage of trading using opposite Align Technology and FIEI3F positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Align Technology position performs unexpectedly, FIEI3F 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 FIEI3F will offset losses from the drop in FIEI3F's long position.

The idea behind Align Technology and FIEI3F 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.