Correlation Between HEINEKEN and Align Technology

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

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

Diversification Opportunities for HEINEKEN and Align Technology

-0.01

Correlation Coefficient

HEINEKEN  Align Technology

Good diversification

The 3 months correlation between HEINEKEN and Align is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding HEINEKEN SP ADR and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and HEINEKEN 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 HEINEKEN SP ADR 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 HEINEKEN i.e., HEINEKEN and Align Technology go up and down completely randomly.

Pair Corralation between HEINEKEN and Align Technology

Assuming the 90 days trading horizon HEINEKEN SP ADR is expected to under-perform the Align Technology. But the stock apears to be less risky and, when comparing its historical volatility, HEINEKEN SP ADR is 1.75 times less risky than Align Technology. The stock trades about -0.19 of its potential returns per unit of risk. The Align Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  19,910  in Align Technology on September 5, 2024 and sell it today you would earn a total of  2,250  from holding Align Technology or generate 11.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

HEINEKEN SP ADR  vs.  Align Technology

HEINEKEN SP ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEINEKEN SP ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Align Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Align Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HEINEKEN and Align Technology

The main advantage of trading using opposite HEINEKEN and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEINEKEN 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 HEINEKEN SP ADR 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.