Correlation Between Align Technology and CM Hospitalar

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

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

Diversification Opportunities for Align Technology and CM Hospitalar

-0.45

Correlation Coefficient

Align Technology  CM Hospitalar

Very good diversification

The 3 months correlation between Align and VVEO3 is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and CM Hospitalar SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CM Hospitalar 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 CM Hospitalar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CM Hospitalar SA has no effect on the direction of Align Technology i.e., Align Technology and CM Hospitalar go up and down completely randomly.

Pair Corralation between Align Technology and CM Hospitalar

Assuming the 90 days trading horizon Align Technology is expected to generate 0.31 times more return on investment than CM Hospitalar. However, Align Technology is 3.24 times less risky than CM Hospitalar. It trades about 0.11 of its potential returns per unit of risk. CM Hospitalar SA is currently generating about -0.02 per unit of risk. If you would invest  31,801  in Align Technology on September 12, 2024 and sell it today you would earn a total of  3,053  from holding Align Technology or generate 9.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Align Technology  vs.  CM Hospitalar SA

Align Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 8 (%) 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 January 2025.

CM Hospitalar SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CM Hospitalar SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CM Hospitalar is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Align Technology and CM Hospitalar

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

The idea behind Align Technology and CM Hospitalar 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.