Correlation Between Align Technology and Shionogi

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

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

Diversification Opportunities for Align Technology and Shionogi

0.4

Correlation Coefficient

Align Technology  Shionogi

Very weak diversification

The 3 months correlation between Align and Shionogi is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Shionogi Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shionogi 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 Shionogi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shionogi has no effect on the direction of Align Technology i.e., Align Technology and Shionogi go up and down completely randomly.

Pair Corralation between Align Technology and Shionogi

Assuming the 90 days horizon Align Technology is expected to generate 2.58 times less return on investment than Shionogi. In addition to that, Align Technology is 1.79 times more volatile than Shionogi Co. It trades about 0.02 of its total potential returns per unit of risk. Shionogi Co is currently generating about 0.1 per unit of volatility. If you would invest  1,280  in Shionogi Co on October 12, 2024 and sell it today you would earn a total of  50.00  from holding Shionogi Co or generate 3.91% 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.  Shionogi Co

Align Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Align Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Shionogi

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shionogi Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Shionogi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Align Technology and Shionogi

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

The idea behind Align Technology and Shionogi 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.