Correlation Between Microsoft and Align Technology
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Align Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Align Technology, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Align Technology.
Diversification Opportunities for Microsoft and Align Technology
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Align is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Align Technology go up and down completely randomly.
Pair Corralation between Microsoft and Align Technology
Assuming the 90 days trading horizon Microsoft is expected to under-perform the Align Technology. In addition to that, Microsoft is 1.57 times more volatile than Align Technology. It trades about -0.04 of its total potential returns per unit of risk. Align Technology is currently generating about 0.21 per unit of volatility. If you would invest 31,230 in Align Technology on August 26, 2024 and sell it today you would earn a total of 1,506 from holding Align Technology or generate 4.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Align Technology
Performance |
| Timeline |
| Microsoft |
| Align Technology |
Microsoft and Align Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Align Technology
The main advantage of trading using opposite Microsoft and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Align Technology | Microsoft vs. Hospital Mater Dei | Microsoft vs. Planet Fitness | Microsoft vs. Charter Communications |
| Align Technology vs. Abbott Laboratories | Align Technology vs. Boston Scientific | Align Technology vs. Energisa SA | Align Technology vs. BTG Pactual Logstica |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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