Correlation Between GP Investments and Align Technology

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

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

Diversification Opportunities for GP Investments and Align Technology

0.28

Correlation Coefficient

GP Investments  Align Technology

Modest diversification

The 3 months correlation between GPIV33 and Align is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding GP Investments and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and GP Investments 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 GP Investments 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 GP Investments i.e., GP Investments and Align Technology go up and down completely randomly.

Pair Corralation between GP Investments and Align Technology

Assuming the 90 days trading horizon GP Investments is expected to under-perform the Align Technology. In addition to that, GP Investments is 2.81 times more volatile than Align Technology. It trades about -0.02 of its total potential returns per unit of risk. Align Technology is currently generating about 0.08 per unit of volatility. If you would invest  32,457  in Align Technology on September 4, 2024 and sell it today you would earn a total of  2,397  from holding Align Technology or generate 7.39% return on investment over 90 days.

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

GP Investments  vs.  Align Technology

GP Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GP Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, GP Investments is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Align Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Align Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GP Investments and Align Technology

The main advantage of trading using opposite GP Investments and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GP Investments 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 GP Investments 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.