Correlation Between Align Technology and Credit Acceptance
Can any of the company-specific risk be diversified away by investing in both Align Technology and Credit Acceptance 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 Credit Acceptance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Align Technology and Credit Acceptance, you can compare the effects of market volatilities on Align Technology and Credit Acceptance 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 Credit Acceptance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Align Technology and Credit Acceptance.
Diversification Opportunities for Align Technology and Credit Acceptance
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Align and Credit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Credit Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Acceptance 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 Credit Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Acceptance has no effect on the direction of Align Technology i.e., Align Technology and Credit Acceptance go up and down completely randomly.
Pair Corralation between Align Technology and Credit Acceptance
Assuming the 90 days trading horizon Align Technology is expected to generate 1.54 times more return on investment than Credit Acceptance. However, Align Technology is 1.54 times more volatile than Credit Acceptance. It trades about 0.04 of its potential returns per unit of risk. Credit Acceptance is currently generating about 0.03 per unit of risk. If you would invest 24,950 in Align Technology on August 30, 2024 and sell it today you would earn a total of 9,904 from holding Align Technology or generate 39.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Align Technology vs. Credit Acceptance
Performance |
| Timeline |
| Align Technology |
| Credit Acceptance |
Align Technology and Credit Acceptance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Align Technology and Credit Acceptance
The main advantage of trading using opposite Align Technology and Credit Acceptance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Align Technology position performs unexpectedly, Credit Acceptance 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 Credit Acceptance will offset losses from the drop in Credit Acceptance's long position.| Align Technology vs. G2D Investments | Align Technology vs. UnitedHealth Group Incorporated | Align Technology vs. STMicroelectronics NV | Align Technology vs. MAHLE Metal Leve |
| Credit Acceptance vs. Extra Space Storage | Credit Acceptance vs. Warner Music Group | Credit Acceptance vs. GP Investments | Credit Acceptance vs. G2D Investments |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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