Correlation Between Align Technology and Raytheon Technologies
Can any of the company-specific risk be diversified away by investing in both Align Technology and Raytheon Technologies 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 Raytheon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Align Technology and Raytheon Technologies, you can compare the effects of market volatilities on Align Technology and Raytheon Technologies 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 Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Align Technology and Raytheon Technologies.
Diversification Opportunities for Align Technology and Raytheon Technologies
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Align and Raytheon is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Raytheon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Align Technology i.e., Align Technology and Raytheon Technologies go up and down completely randomly.
Pair Corralation between Align Technology and Raytheon Technologies
Assuming the 90 days trading horizon Align Technology is expected to generate 0.91 times more return on investment than Raytheon Technologies. However, Align Technology is 1.1 times less risky than Raytheon Technologies. It trades about 0.31 of its potential returns per unit of risk. Raytheon Technologies is currently generating about 0.06 per unit of risk. If you would invest 31,230 in Align Technology on August 31, 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. Raytheon Technologies
Performance |
| Timeline |
| Align Technology |
| Raytheon Technologies |
Align Technology and Raytheon Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Align Technology and Raytheon Technologies
The main advantage of trading using opposite Align Technology and Raytheon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Align Technology position performs unexpectedly, Raytheon Technologies 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 Raytheon Technologies will offset losses from the drop in Raytheon Technologies' long position.| Align Technology vs. Abbott Laboratories | Align Technology vs. Fras le SA | Align Technology vs. Western Digital | Align Technology vs. Energisa SA |
| Raytheon Technologies vs. Taurus Armas SA | Raytheon Technologies vs. Fras le SA | Raytheon Technologies vs. Western Digital | Raytheon Technologies vs. Energisa SA |
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 Stocks Directory module to find actively traded stocks across global markets.
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