Correlation Between Align Technology and Visa

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

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

Diversification Opportunities for Align Technology and Visa

0.66

Correlation Coefficient

Align Technology  Visa

Poor diversification

The 3 months correlation between Align and Visa is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of Align Technology i.e., Align Technology and Visa go up and down completely randomly.

Pair Corralation between Align Technology and Visa

Assuming the 90 days trading horizon Align Technology is expected to generate 0.39 times more return on investment than Visa. However, Align Technology is 2.55 times less risky than Visa. It trades about -0.04 of its potential returns per unit of risk. Visa Inc is currently generating about -0.04 per unit of risk. If you would invest  32,703  in Align Technology on October 20, 2024 and sell it today you would lose (160.00) from holding Align Technology or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Align Technology  vs.  Visa Inc

Align Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Align Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Visa Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Visa sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Align Technology and Visa

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

The idea behind Align Technology and Visa Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.