Correlation Between Align Technology and LEGAL GENERAL
Can any of the company-specific risk be diversified away by investing in both Align Technology and LEGAL GENERAL 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 LEGAL GENERAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Align Technology and LEGAL GENERAL, you can compare the effects of market volatilities on Align Technology and LEGAL GENERAL 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 LEGAL GENERAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Align Technology and LEGAL GENERAL.
Diversification Opportunities for Align Technology and LEGAL GENERAL
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Align and LEGAL is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and LEGAL GENERAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEGAL GENERAL 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 LEGAL GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEGAL GENERAL has no effect on the direction of Align Technology i.e., Align Technology and LEGAL GENERAL go up and down completely randomly.
Pair Corralation between Align Technology and LEGAL GENERAL
Assuming the 90 days horizon Align Technology is expected to generate 1.1 times more return on investment than LEGAL GENERAL. However, Align Technology is 1.1 times more volatile than LEGAL GENERAL. It trades about 0.3 of its potential returns per unit of risk. LEGAL GENERAL is currently generating about 0.09 per unit of risk. If you would invest 20,190 in Align Technology on October 28, 2024 and sell it today you would earn a total of 1,990 from holding Align Technology or generate 9.86% 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. LEGAL GENERAL
Performance |
| Timeline |
| Align Technology |
| LEGAL GENERAL |
Align Technology and LEGAL GENERAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Align Technology and LEGAL GENERAL
The main advantage of trading using opposite Align Technology and LEGAL GENERAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Align Technology position performs unexpectedly, LEGAL GENERAL 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 LEGAL GENERAL will offset losses from the drop in LEGAL GENERAL's long position.| Align Technology vs. Abbott Laboratories | Align Technology vs. Abbott Laboratories | Align Technology vs. Medtronic PLC | Align Technology vs. Stryker |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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