Correlation Between Align Technology and American Airlines
Can any of the company-specific risk be diversified away by investing in both Align Technology and American Airlines 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 Align Technology and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Align Technology and American Airlines Group, you can compare the effects of market volatilities on Align Technology and American Airlines 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 Align Technology with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Align Technology and American Airlines.
Diversification Opportunities for Align Technology and American Airlines
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Align and American is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Align Technology 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 Align Technology are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Align Technology i.e., Align Technology and American Airlines go up and down completely randomly.
Pair Corralation between Align Technology and American Airlines
Assuming the 90 days trading horizon Align Technology is expected to generate 0.82 times more return on investment than American Airlines. However, Align Technology is 1.23 times less risky than American Airlines. It trades about 0.31 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.17 per unit of risk. If you would invest 31,230 in Align Technology on August 30, 2024 and sell it today you would earn a total of 3,624 from holding Align Technology or generate 11.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Align Technology vs. American Airlines Group
Performance |
| Timeline |
| Align Technology |
| American Airlines |
Align Technology and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Align Technology and American Airlines
The main advantage of trading using opposite Align Technology and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Align Technology position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.The idea behind Align Technology and American Airlines Group 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.| American Airlines vs. Fidelity National Information | American Airlines vs. The Home Depot | American Airlines vs. Paycom Software | American Airlines vs. NXP Semiconductors NV |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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