Correlation Between WILLIS LEASE and Align Technology

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

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

Diversification Opportunities for WILLIS LEASE and Align Technology

0.73

Correlation Coefficient

WILLIS LEASE  Align Technology

Poor diversification

The 3 months correlation between WILLIS and Align is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and WILLIS LEASE 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 WILLIS LEASE FIN 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 WILLIS LEASE i.e., WILLIS LEASE and Align Technology go up and down completely randomly.

Pair Corralation between WILLIS LEASE and Align Technology

Assuming the 90 days horizon WILLIS LEASE FIN is expected to generate 1.57 times more return on investment than Align Technology. However, WILLIS LEASE is 1.57 times more volatile than Align Technology. It trades about -0.07 of its potential returns per unit of risk. Align Technology is currently generating about -0.19 per unit of risk. If you would invest  18,976  in WILLIS LEASE FIN on December 29, 2024 and sell it today you would lose (3,376) from holding WILLIS LEASE FIN or give up 17.79% of portfolio value over 90 days.

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

WILLIS LEASE FIN  vs.  Align Technology

WILLIS LEASE FIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days WILLIS LEASE FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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.

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 WILLIS LEASE and Align Technology

The main advantage of trading using opposite WILLIS LEASE and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WILLIS LEASE 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 WILLIS LEASE FIN 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.