Correlation Between Penta Ocean and Align Technology

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

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

Diversification Opportunities for Penta Ocean and Align Technology

-0.83

Correlation Coefficient

Penta Ocean  Align Technology

Pay attention - limited upside

The 3 months correlation between Penta and Align is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and Penta Ocean 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 Penta Ocean Construction Co 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 Penta Ocean i.e., Penta Ocean and Align Technology go up and down completely randomly.

Pair Corralation between Penta Ocean and Align Technology

Assuming the 90 days horizon Penta Ocean Construction Co is expected to generate 0.94 times more return on investment than Align Technology. However, Penta Ocean Construction Co is 1.07 times less risky than Align Technology. It trades about 0.11 of its potential returns per unit of risk. Align Technology is currently generating about -0.19 per unit of risk. If you would invest  385.00  in Penta Ocean Construction Co on December 28, 2024 and sell it today you would earn a total of  52.00  from holding Penta Ocean Construction Co or generate 13.51% return on investment over 90 days.

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

Penta Ocean Construction Co  vs.  Align Technology

Penta Ocean Construc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penta Ocean reported solid returns over the last few months and may actually be approaching a breakup point.

Align Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Align Technology 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 basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Penta Ocean and Align Technology

The main advantage of trading using opposite Penta Ocean and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penta Ocean 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 Penta Ocean Construction Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.