Correlation Between COSMOSTEEL HLDGS and Align Technology

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

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

Diversification Opportunities for COSMOSTEEL HLDGS and Align Technology

0.42

Correlation Coefficient

COSMOSTEEL HLDGS  Align Technology

Very weak diversification

The 3 months correlation between COSMOSTEEL and Align is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding COSMOSTEEL HLDGS and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and COSMOSTEEL HLDGS 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 COSMOSTEEL HLDGS 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 COSMOSTEEL HLDGS i.e., COSMOSTEEL HLDGS and Align Technology go up and down completely randomly.

Pair Corralation between COSMOSTEEL HLDGS and Align Technology

Assuming the 90 days trading horizon COSMOSTEEL HLDGS is expected to under-perform the Align Technology. In addition to that, COSMOSTEEL HLDGS is 1.06 times more volatile than Align Technology. It trades about -0.26 of its total potential returns per unit of risk. Align Technology is currently generating about -0.27 per unit of volatility. If you would invest  22,400  in Align Technology on October 11, 2024 and sell it today you would lose (2,350) from holding Align Technology or give up 10.49% of portfolio value over 90 days.

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

COSMOSTEEL HLDGS  vs.  Align Technology

COSMOSTEEL HLDGS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COSMOSTEEL HLDGS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, COSMOSTEEL HLDGS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 COSMOSTEEL HLDGS and Align Technology

The main advantage of trading using opposite COSMOSTEEL HLDGS and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSMOSTEEL HLDGS 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 COSMOSTEEL HLDGS 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.