Correlation Between Align Technology and Sims Metal
Can any of the company-specific risk be diversified away by investing in both Align Technology and Sims Metal 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 Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Align Technology and Sims Metal Management, you can compare the effects of market volatilities on Align Technology and Sims Metal 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 Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Align Technology and Sims Metal.
Diversification Opportunities for Align Technology and Sims Metal
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Align and Sims is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management 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 Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of Align Technology i.e., Align Technology and Sims Metal go up and down completely randomly.
Pair Corralation between Align Technology and Sims Metal
Assuming the 90 days horizon Align Technology is expected to generate 0.72 times more return on investment than Sims Metal. However, Align Technology is 1.39 times less risky than Sims Metal. It trades about 0.25 of its potential returns per unit of risk. Sims Metal Management is currently generating about 0.01 per unit of risk. If you would invest 19,620 in Align Technology on August 30, 2024 and sell it today you would earn a total of 1,960 from holding Align Technology or generate 9.99% 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. Sims Metal Management
Performance |
| Timeline |
| Align Technology |
| Sims Metal Management |
Align Technology and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Align Technology and Sims Metal
The main advantage of trading using opposite Align Technology and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Align Technology position performs unexpectedly, Sims Metal 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 Sims Metal will offset losses from the drop in Sims Metal's long position.| Align Technology vs. Abbott Laboratories | Align Technology vs. Medtronic PLC | Align Technology vs. Stryker | Align Technology vs. Boston Scientific |
| Sims Metal vs. Steel Dynamics | Sims Metal vs. Superior Plus Corp | Sims Metal vs. SIVERS SEMICONDUCTORS AB | Sims Metal vs. Identiv |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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