Correlation Between CM Hospitalar and Align Technology

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

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

Diversification Opportunities for CM Hospitalar and Align Technology

-0.46

Correlation Coefficient

CM Hospitalar  Align Technology

Very good diversification

The 3 months correlation between VVEO3 and Align is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding CM Hospitalar SA and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and CM Hospitalar 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 CM Hospitalar 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 CM Hospitalar i.e., CM Hospitalar and Align Technology go up and down completely randomly.

Pair Corralation between CM Hospitalar and Align Technology

Assuming the 90 days trading horizon CM Hospitalar is expected to generate 1.18 times less return on investment than Align Technology. In addition to that, CM Hospitalar is 2.96 times more volatile than Align Technology. It trades about 0.02 of its total potential returns per unit of risk. Align Technology is currently generating about 0.06 per unit of volatility. 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

CM Hospitalar SA  vs.  Align Technology

CM Hospitalar SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CM Hospitalar SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CM Hospitalar is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private 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 CM Hospitalar and Align Technology

The main advantage of trading using opposite CM Hospitalar and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CM Hospitalar 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 CM Hospitalar 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.

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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 Stocks Directory module to find actively traded stocks across global markets.