Correlation Between Align Technology and Entain Plc

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

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

Diversification Opportunities for Align Technology and Entain Plc

0.7

Correlation Coefficient

Align Technology  Entain Plc

Poor diversification

The 3 months correlation between Align and Entain is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Entain Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entain Plc 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 Entain Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entain Plc has no effect on the direction of Align Technology i.e., Align Technology and Entain Plc go up and down completely randomly.

Pair Corralation between Align Technology and Entain Plc

Assuming the 90 days horizon Align Technology is expected to under-perform the Entain Plc. But the stock apears to be less risky and, when comparing its historical volatility, Align Technology is 1.02 times less risky than Entain Plc. The stock trades about -0.02 of its potential returns per unit of risk. The Entain Plc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,054  in Entain Plc on September 26, 2024 and sell it today you would lose (224.00) from holding Entain Plc or give up 21.25% of portfolio value over 90 days.

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

Align Technology  vs.  Entain Plc

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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Entain Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entain Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Align Technology and Entain Plc

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

The idea behind Align Technology and Entain Plc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.