Correlation Between Align Technology and Graphic Packaging

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

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

Diversification Opportunities for Align Technology and Graphic Packaging

0.5

Correlation Coefficient

Align Technology  Graphic Packaging

Very weak diversification

The 3 months correlation between Align and Graphic is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Graphic Packaging Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphic Packaging Holding 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 Graphic Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphic Packaging Holding has no effect on the direction of Align Technology i.e., Align Technology and Graphic Packaging go up and down completely randomly.

Pair Corralation between Align Technology and Graphic Packaging

Assuming the 90 days horizon Align Technology is expected to under-perform the Graphic Packaging. In addition to that, Align Technology is 1.21 times more volatile than Graphic Packaging Holding. It trades about -0.38 of its total potential returns per unit of risk. Graphic Packaging Holding is currently generating about -0.36 per unit of volatility. If you would invest  2,773  in Graphic Packaging Holding on October 8, 2024 and sell it today you would lose (223.00) from holding Graphic Packaging Holding or give up 8.04% of portfolio value over 90 days.

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

Align Technology  vs.  Graphic Packaging Holding

Align Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Align Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Align Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Graphic Packaging Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Graphic Packaging Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Graphic Packaging is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Align Technology and Graphic Packaging

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

The idea behind Align Technology and Graphic Packaging Holding 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..