Correlation Between Align Technology and Shockwave Medical

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

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

Diversification Opportunities for Align Technology and Shockwave Medical

-0.26

Correlation Coefficient

Align Technology  Shockwave Medical

Very good diversification

The 3 months correlation between Align and Shockwave is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Shockwave Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shockwave Medical 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 Shockwave Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shockwave Medical has no effect on the direction of Align Technology i.e., Align Technology and Shockwave Medical go up and down completely randomly.

Pair Corralation between Align Technology and Shockwave Medical

Given the investment horizon of 90 days Align Technology is expected to generate 2.22 times less return on investment than Shockwave Medical. In addition to that, Align Technology is 1.06 times more volatile than Shockwave Medical. It trades about 0.03 of its total potential returns per unit of risk. Shockwave Medical is currently generating about 0.06 per unit of volatility. If you would invest  21,668  in Shockwave Medical on September 2, 2024 and sell it today you would earn a total of  5,177  from holding Shockwave Medical or generate 23.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	31.05%
Values	Daily Returns

Align Technology  vs.  Shockwave Medical

Align Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Align Technology is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Shockwave Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shockwave Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shockwave Medical is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Align Technology and Shockwave Medical

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

The idea behind Align Technology and Shockwave Medical 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.