Correlation Between DexCom and Align Technology
Can any of the company-specific risk be diversified away by investing in both DexCom and Align Technology 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 DexCom and Align Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DexCom Inc and Align Technology, you can compare the effects of market volatilities on DexCom and Align Technology 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 DexCom with a short position of Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of DexCom and Align Technology.
Diversification Opportunities for DexCom and Align Technology
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between DexCom and Align is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding DexCom Inc and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and DexCom 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 DexCom Inc are associated (or correlated) with Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of DexCom i.e., DexCom and Align Technology go up and down completely randomly.
Pair Corralation between DexCom and Align Technology
Assuming the 90 days horizon DexCom is expected to generate 1.19 times less return on investment than Align Technology. In addition to that, DexCom is 1.49 times more volatile than Align Technology. It trades about 0.25 of its total potential returns per unit of risk. Align Technology is currently generating about 0.43 per unit of volatility. If you would invest 18,785 in Align Technology on September 1, 2024 and sell it today you would earn a total of 2,925 from holding Align Technology or generate 15.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
DexCom Inc vs. Align Technology
Performance |
| Timeline |
| DexCom Inc |
| Align Technology |
DexCom and Align Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DexCom and Align Technology
The main advantage of trading using opposite DexCom and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DexCom position performs unexpectedly, Align Technology 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 Align Technology will offset losses from the drop in Align Technology's long position.| DexCom vs. SK TELECOM TDADR | DexCom vs. Citic Telecom International | DexCom vs. Selective Insurance Group | DexCom vs. Universal Insurance Holdings |
| Align Technology vs. SALESFORCE INC CDR | Align Technology vs. YATRA ONLINE DL 0001 | Align Technology vs. National Bank Holdings | Align Technology vs. Mizuho Financial Group |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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