Correlation Between Align Technology and Establishment Labs
Can any of the company-specific risk be diversified away by investing in both Align Technology and Establishment Labs 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 Establishment Labs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Align Technology and Establishment Labs Holdings, you can compare the effects of market volatilities on Align Technology and Establishment Labs 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 Establishment Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Align Technology and Establishment Labs.
Diversification Opportunities for Align Technology and Establishment Labs
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Align and Establishment is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Establishment Labs Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Establishment Labs 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 Establishment Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Establishment Labs has no effect on the direction of Align Technology i.e., Align Technology and Establishment Labs go up and down completely randomly.
Pair Corralation between Align Technology and Establishment Labs
Given the investment horizon of 90 days Align Technology is expected to generate 3.33 times less return on investment than Establishment Labs. But when comparing it to its historical volatility, Align Technology is 1.93 times less risky than Establishment Labs. It trades about 0.09 of its potential returns per unit of risk. Establishment Labs Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,757 in Establishment Labs Holdings on January 20, 2024 and sell it today you would earn a total of 1,500 from holding Establishment Labs Holdings or generate 39.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Align Technology vs. Establishment Labs Holdings
Performance |
| Timeline |
| Align Technology |
| Establishment Labs |
Align Technology and Establishment Labs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Align Technology and Establishment Labs
The main advantage of trading using opposite Align Technology and Establishment Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Align Technology position performs unexpectedly, Establishment Labs 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 Establishment Labs will offset losses from the drop in Establishment Labs' long position.| Align Technology vs. Agilent Technologies | Align Technology vs. Illumina | Align Technology vs. Waters | Align Technology vs. Thermo Fisher Scientific |
| Establishment Labs vs. Agilent Technologies | Establishment Labs vs. Illumina | Establishment Labs vs. Waters | Establishment Labs vs. Thermo Fisher Scientific |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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