Correlation Between Siemens Healthineers and Align Technology
Can any of the company-specific risk be diversified away by investing in both Siemens Healthineers 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 Siemens Healthineers and Align Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Siemens Healthineers AG and Align Technology, you can compare the effects of market volatilities on Siemens Healthineers 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 Siemens Healthineers with a short position of Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siemens Healthineers and Align Technology.
Diversification Opportunities for Siemens Healthineers and Align Technology
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Siemens and Align is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Siemens Healthineers AG and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and Siemens Healthineers 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 Siemens Healthineers AG 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 Siemens Healthineers i.e., Siemens Healthineers and Align Technology go up and down completely randomly.
Pair Corralation between Siemens Healthineers and Align Technology
Assuming the 90 days trading horizon Siemens Healthineers is expected to generate 3.27 times less return on investment than Align Technology. But when comparing it to its historical volatility, Siemens Healthineers AG is 1.17 times less risky than Align Technology. It trades about 0.05 of its potential returns per unit of risk. Align Technology is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 20,190 in Align Technology on September 13, 2024 and sell it today you would earn a total of 2,210 from holding Align Technology or generate 10.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Siemens Healthineers AG vs. Align Technology
Performance |
| Timeline |
| Siemens Healthineers |
| Align Technology |
Siemens Healthineers and Align Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Siemens Healthineers and Align Technology
The main advantage of trading using opposite Siemens Healthineers and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siemens Healthineers 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.The idea behind Siemens Healthineers AG and Align Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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