Correlation Between IMPERIAL TOBACCO and Align Technology
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO 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 IMPERIAL TOBACCO and Align Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and Align Technology, you can compare the effects of market volatilities on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO with a short position of Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and Align Technology.
Diversification Opportunities for IMPERIAL TOBACCO and Align Technology
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IMPERIAL and Align is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Align Technology go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and Align Technology
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.39 times more return on investment than Align Technology. However, IMPERIAL TOBACCO is 2.57 times less risky than Align Technology. It trades about 0.11 of its potential returns per unit of risk. Align Technology is currently generating about 0.02 per unit of risk. If you would invest 3,079 in IMPERIAL TOBACCO on October 30, 2024 and sell it today you would earn a total of 89.00 from holding IMPERIAL TOBACCO or generate 2.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IMPERIAL TOBACCO vs. Align Technology
Performance |
| Timeline |
| IMPERIAL TOBACCO |
| Align Technology |
IMPERIAL TOBACCO and Align Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IMPERIAL TOBACCO and Align Technology
The main advantage of trading using opposite IMPERIAL TOBACCO and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO 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.| IMPERIAL TOBACCO vs. Clean Energy Fuels | IMPERIAL TOBACCO vs. BII Railway Transportation | IMPERIAL TOBACCO vs. SALESFORCE INC CDR | IMPERIAL TOBACCO vs. Broadridge Financial Solutions |
| Align Technology vs. TIANDE CHEMICAL | Align Technology vs. X FAB Silicon Foundries | Align Technology vs. Games Workshop Group | Align Technology vs. PLAYMATES TOYS |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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