Correlation Between CVB Financial and Align Technology

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

By analyzing existing cross correlation between CVB Financial Corp and Align Technology, you can compare the effects of market volatilities on CVB Financial and Align Technology 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 CVB Financial with a short position of Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVB Financial and Align Technology.

Diversification Opportunities for CVB Financial and Align Technology

0.37

Correlation Coefficient

CVB Financial  Align Technology

Weak diversification

The 3 months correlation between CVB and Align is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CVB Financial Corp and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and CVB Financial 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 CVB Financial Corp are associated (or correlated) with Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of CVB Financial i.e., CVB Financial and Align Technology go up and down completely randomly.

Pair Corralation between CVB Financial and Align Technology

Assuming the 90 days horizon CVB Financial Corp is expected to generate 1.65 times more return on investment than Align Technology. However, CVB Financial is 1.65 times more volatile than Align Technology. It trades about 0.14 of its potential returns per unit of risk. Align Technology is currently generating about -0.04 per unit of risk. If you would invest  1,604  in CVB Financial Corp on October 8, 2024 and sell it today you would earn a total of  416.00  from holding CVB Financial Corp or generate 25.94% return on investment over 90 days.

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

CVB Financial Corp  vs.  Align Technology

CVB Financial Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CVB Financial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CVB Financial reported solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with CVB Financial and Align Technology

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

The idea behind CVB Financial Corp and Align Technology 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.