Correlation Between Align Technology and ROHM

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

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

Diversification Opportunities for Align Technology and ROHM

-0.36

Correlation Coefficient

Align Technology  ROHM

Very good diversification

The 3 months correlation between Align and ROHM is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and ROHM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROHM 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 ROHM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROHM has no effect on the direction of Align Technology i.e., Align Technology and ROHM go up and down completely randomly.

Pair Corralation between Align Technology and ROHM

Assuming the 90 days horizon Align Technology is expected to generate 1.33 times more return on investment than ROHM. However, Align Technology is 1.33 times more volatile than ROHM Co. It trades about 0.02 of its potential returns per unit of risk. ROHM Co is currently generating about -0.05 per unit of risk. If you would invest  20,030  in Align Technology on September 25, 2024 and sell it today you would earn a total of  200.00  from holding Align Technology or generate 1.0% return on investment over 90 days.

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

Align Technology  vs.  ROHM Co

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

ROHM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ROHM Co 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 ROHM

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

The idea behind Align Technology and ROHM Co 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.