Correlation Between Northern Data and Align Technology

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

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

Diversification Opportunities for Northern Data and Align Technology

0.3

Correlation Coefficient

Northern Data  Align Technology

Weak diversification

The 3 months correlation between Northern and Align is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Northern Data AG and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and Northern Data 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 Northern Data AG 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 Northern Data i.e., Northern Data and Align Technology go up and down completely randomly.

Pair Corralation between Northern Data and Align Technology

Assuming the 90 days trading horizon Northern Data AG is expected to generate 2.14 times more return on investment than Align Technology. However, Northern Data is 2.14 times more volatile than Align Technology. It trades about 0.3 of its potential returns per unit of risk. Align Technology is currently generating about -0.17 per unit of risk. If you would invest  3,955  in Northern Data AG on October 11, 2024 and sell it today you would earn a total of  990.00  from holding Northern Data AG or generate 25.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Northern Data AG  vs.  Align Technology

Northern Data AG

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Data AG are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Northern Data unveiled solid returns over the last few months and may actually be approaching a breakup point.

Align Technology

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Align Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Northern Data and Align Technology

The main advantage of trading using opposite Northern Data and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Data 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 Northern Data AG 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.