Correlation Between China Energy and Align Technology
Can any of the company-specific risk be diversified away by investing in both China Energy 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 China Energy and Align Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Energy Engineering and Align Technology, you can compare the effects of market volatilities on China Energy 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 China Energy with a short position of Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Energy and Align Technology.
Diversification Opportunities for China Energy and Align Technology
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Align is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding China Energy Engineering and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and China Energy 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 China Energy Engineering 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 China Energy i.e., China Energy and Align Technology go up and down completely randomly.
Pair Corralation between China Energy and Align Technology
Assuming the 90 days horizon China Energy Engineering is expected to generate 2.11 times more return on investment than Align Technology. However, China Energy is 2.11 times more volatile than Align Technology. It trades about 0.1 of its potential returns per unit of risk. Align Technology is currently generating about -0.04 per unit of risk. If you would invest 6.32 in China Energy Engineering on September 3, 2024 and sell it today you would earn a total of 4.68 from holding China Energy Engineering or generate 74.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Energy Engineering vs. Align Technology
Performance |
| Timeline |
| China Energy Engineering |
| Align Technology |
China Energy and Align Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Energy and Align Technology
The main advantage of trading using opposite China Energy and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Energy 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.| China Energy vs. Nufarm Limited | China Energy vs. SBM OFFSHORE | China Energy vs. Dairy Farm International | China Energy vs. Hitachi Construction Machinery |
| Align Technology vs. Stryker | Align Technology vs. Insulet | Align Technology vs. Superior Plus Corp | Align Technology vs. NMI Holdings |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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