Correlation Between Align Technology and Sea
Can any of the company-specific risk be diversified away by investing in both Align Technology and Sea 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 Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Align Technology and Sea Limited, you can compare the effects of market volatilities on Align Technology and Sea 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 Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Align Technology and Sea.
Diversification Opportunities for Align Technology and Sea
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Align and Sea is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Sea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Limited 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Limited has no effect on the direction of Align Technology i.e., Align Technology and Sea go up and down completely randomly.
Pair Corralation between Align Technology and Sea
Assuming the 90 days trading horizon Align Technology is expected to generate 2.24 times less return on investment than Sea. But when comparing it to its historical volatility, Align Technology is 1.58 times less risky than Sea. It trades about 0.31 of its potential returns per unit of risk. Sea Limited is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 2,189 in Sea Limited on August 31, 2024 and sell it today you would earn a total of 607.00 from holding Sea Limited or generate 27.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Align Technology vs. Sea Limited
Performance |
| Timeline |
| Align Technology |
| Sea Limited |
Align Technology and Sea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Align Technology and Sea
The main advantage of trading using opposite Align Technology and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Align Technology position performs unexpectedly, Sea 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 Sea will offset losses from the drop in Sea's long position.| Align Technology vs. Abbott Laboratories | Align Technology vs. Fras le SA | Align Technology vs. Western Digital | Align Technology vs. Energisa SA |
| Sea vs. Align Technology | Sea vs. Zoom Video Communications | Sea vs. Unity Software | Sea vs. salesforce inc |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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