Correlation Between Halliburton and Align Technology

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

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

Diversification Opportunities for Halliburton and Align Technology

0.76

Correlation Coefficient

Halliburton  Align Technology

Poor diversification

The 3 months correlation between Halliburton and Align is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Halliburton and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and Halliburton 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 Halliburton 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 Halliburton i.e., Halliburton and Align Technology go up and down completely randomly.

Pair Corralation between Halliburton and Align Technology

Assuming the 90 days trading horizon Halliburton is expected to under-perform the Align Technology. But the stock apears to be less risky and, when comparing its historical volatility, Halliburton is 1.32 times less risky than Align Technology. The stock trades about -0.01 of its potential returns per unit of risk. The Align Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  30,456  in Align Technology on October 11, 2024 and sell it today you would earn a total of  2,144  from holding Align Technology or generate 7.04% return on investment over 90 days.

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

Halliburton  vs.  Align Technology

Halliburton

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Halliburton are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Halliburton is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Align Technology

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Align Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Halliburton and Align Technology

The main advantage of trading using opposite Halliburton and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Halliburton 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 Halliburton 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.