Correlation Between Iron Mountain and Align Technology

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

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

Diversification Opportunities for Iron Mountain and Align Technology

0.06

Correlation Coefficient

Iron Mountain  Align Technology

Significant diversification

The 3 months correlation between Iron and Align is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Iron Mountain Incorporated and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and Iron Mountain 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 Iron Mountain Incorporated 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 Iron Mountain i.e., Iron Mountain and Align Technology go up and down completely randomly.

Pair Corralation between Iron Mountain and Align Technology

Assuming the 90 days trading horizon Iron Mountain is expected to generate 2.02 times less return on investment than Align Technology. In addition to that, Iron Mountain is 1.37 times more volatile than Align Technology. It trades about 0.05 of its total potential returns per unit of risk. Align Technology is currently generating about 0.13 per unit of volatility. If you would invest  31,801  in Align Technology on September 16, 2024 and sell it today you would earn a total of  4,044  from holding Align Technology or generate 12.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Iron Mountain Incorporated  vs.  Align Technology

Iron Mountain

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Iron Mountain Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Iron Mountain 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

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 10 (%) 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 Iron Mountain and Align Technology

The main advantage of trading using opposite Iron Mountain and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Mountain 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 Iron Mountain Incorporated 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.