Correlation Between LESTE FDO and Align Technology

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

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

Diversification Opportunities for LESTE FDO and Align Technology

-0.5

Correlation Coefficient

LESTE FDO  Align Technology

Very good diversification

The 3 months correlation between LESTE and Align is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding LESTE FDO INV and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and LESTE FDO 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 LESTE FDO INV 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 LESTE FDO i.e., LESTE FDO and Align Technology go up and down completely randomly.

Pair Corralation between LESTE FDO and Align Technology

Assuming the 90 days trading horizon LESTE FDO INV is expected to under-perform the Align Technology. But the fund apears to be less risky and, when comparing its historical volatility, LESTE FDO INV is 1.04 times less risky than Align Technology. The fund trades about -0.1 of its potential returns per unit of risk. The Align Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  30,752  in Align Technology on October 21, 2024 and sell it today you would earn a total of  1,791  from holding Align Technology or generate 5.82% return on investment over 90 days.

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

LESTE FDO INV  vs.  Align Technology

LESTE FDO INV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LESTE FDO INV has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Align Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 5 (%) 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 February 2025.

Pair Trading with LESTE FDO and Align Technology

The main advantage of trading using opposite LESTE FDO and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LESTE FDO 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 LESTE FDO INV 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.