Correlation Between Align Technology and Encision

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Can any of the company-specific risk be diversified away by investing in both Align Technology and Encision 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 Encision into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Align Technology and Encision, you can compare the effects of market volatilities on Align Technology and Encision 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 Encision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Align Technology and Encision.

Diversification Opportunities for Align Technology and Encision

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Align and Encision is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Encision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encision 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 Encision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encision has no effect on the direction of Align Technology i.e., Align Technology and Encision go up and down completely randomly.

Pair Corralation between Align Technology and Encision

Given the investment horizon of 90 days Align Technology is expected to generate 7.59 times less return on investment than Encision. But when comparing it to its historical volatility, Align Technology is 1.3 times less risky than Encision. It trades about 0.01 of its potential returns per unit of risk. Encision is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  39.00  in Encision on December 29, 2023 and sell it today you would earn a total of  7.00  from holding Encision or generate 17.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy83.33%
ValuesDaily Returns

Align Technology  vs.  Encision

 Performance 
       Timeline  
Align Technology 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Align Technology displayed solid returns over the last few months and may actually be approaching a breakup point.
Encision 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
OK
Over the last 90 days Encision has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak forward indicators, Encision sustained solid returns over the last few months and may actually be approaching a breakup point.

Align Technology and Encision Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Align Technology and Encision

The main advantage of trading using opposite Align Technology and Encision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Align Technology position performs unexpectedly, Encision 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 Encision will offset losses from the drop in Encision's long position.
The idea behind Align Technology and Encision 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.
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 Transaction History module to view history of all your transactions and understand their impact on performance.

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