Correlation Between Align Technology and Raytheon Technologies

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

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

Diversification Opportunities for Align Technology and Raytheon Technologies

-0.41

Correlation Coefficient

Align Technology  Raytheon Technologies

Very good diversification

The 3 months correlation between Align and Raytheon is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Raytheon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Align Technology i.e., Align Technology and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Align Technology and Raytheon Technologies

Assuming the 90 days trading horizon Align Technology is expected to under-perform the Raytheon Technologies. In addition to that, Align Technology is 1.18 times more volatile than Raytheon Technologies. It trades about -0.07 of its total potential returns per unit of risk. Raytheon Technologies is currently generating about 0.16 per unit of volatility. If you would invest  7,325  in Raytheon Technologies on December 2, 2024 and sell it today you would earn a total of  5,623  from holding Raytheon Technologies or generate 76.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.79%
Values	Daily Returns

Align Technology  vs.  Raytheon Technologies

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.

Raytheon Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Raytheon Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Align Technology and Raytheon Technologies

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

The idea behind Align Technology and Raytheon Technologies 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.