Correlation Between Lupatech and Align Technology

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

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

Diversification Opportunities for Lupatech and Align Technology

-0.41

Correlation Coefficient

Lupatech  Align Technology

Very good diversification

The 3 months correlation between Lupatech and Align is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Lupatech SA and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and Lupatech 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 Lupatech SA 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 Lupatech i.e., Lupatech and Align Technology go up and down completely randomly.

Pair Corralation between Lupatech and Align Technology

Assuming the 90 days trading horizon Lupatech SA is expected to under-perform the Align Technology. In addition to that, Lupatech is 1.79 times more volatile than Align Technology. It trades about -0.06 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 5, 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 Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Lupatech SA  vs.  Align Technology

Lupatech SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lupatech SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private 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 Lupatech and Align Technology

The main advantage of trading using opposite Lupatech and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lupatech 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 Lupatech SA 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.