Correlation Between Align Technology and Charles Schwab

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

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

Diversification Opportunities for Align Technology and Charles Schwab

0.23

Correlation Coefficient

Align Technology  Charles Schwab

Modest diversification

The 3 months correlation between Align and Charles is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and The Charles Schwab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab 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 Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab has no effect on the direction of Align Technology i.e., Align Technology and Charles Schwab go up and down completely randomly.

Pair Corralation between Align Technology and Charles Schwab

Assuming the 90 days horizon Align Technology is expected to under-perform the Charles Schwab. In addition to that, Align Technology is 1.02 times more volatile than The Charles Schwab. It trades about -0.03 of its total potential returns per unit of risk. The Charles Schwab is currently generating about 0.03 per unit of volatility. If you would invest  6,770  in The Charles Schwab on September 29, 2024 and sell it today you would earn a total of  399.00  from holding The Charles Schwab or generate 5.89% return on investment over 90 days.

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

Align Technology  vs.  The Charles Schwab

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.

Charles Schwab

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Charles Schwab are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Charles Schwab reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Align Technology and Charles Schwab

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

The idea behind Align Technology and The Charles Schwab 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.