Correlation Between Align Technology and ASHFORD HOSPITTRUST

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

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

Diversification Opportunities for Align Technology and ASHFORD HOSPITTRUST

0.48

Correlation Coefficient

Align Technology  ASHFORD HOSPITTRUST

Very weak diversification

The 3 months correlation between Align and ASHFORD is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and ASHFORD HOSPITTRUST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASHFORD HOSPITTRUST 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 ASHFORD HOSPITTRUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASHFORD HOSPITTRUST has no effect on the direction of Align Technology i.e., Align Technology and ASHFORD HOSPITTRUST go up and down completely randomly.

Pair Corralation between Align Technology and ASHFORD HOSPITTRUST

Assuming the 90 days horizon Align Technology is expected to generate 0.59 times more return on investment than ASHFORD HOSPITTRUST. However, Align Technology is 1.69 times less risky than ASHFORD HOSPITTRUST. It trades about 0.08 of its potential returns per unit of risk. ASHFORD HOSPITTRUST is currently generating about -0.14 per unit of risk. If you would invest  20,340  in Align Technology on September 12, 2024 and sell it today you would earn a total of  2,060  from holding Align Technology or generate 10.13% return on investment over 90 days.

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

Align Technology  vs.  ASHFORD HOSPITTRUST

Align Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Align Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ASHFORD HOSPITTRUST

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASHFORD HOSPITTRUST has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Align Technology and ASHFORD HOSPITTRUST

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

The idea behind Align Technology and ASHFORD HOSPITTRUST 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.