Correlation Between AmerisourceBergen and Align Technology

Can any of the company-specific risk be diversified away by investing in both AmerisourceBergen 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 AmerisourceBergen and Align Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AmerisourceBergen and Align Technology, you can compare the effects of market volatilities on AmerisourceBergen 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 AmerisourceBergen with a short position of Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of AmerisourceBergen and Align Technology.

Diversification Opportunities for AmerisourceBergen and Align Technology

0.66

Correlation Coefficient

AmerisourceBergen  Align Technology

Poor diversification

The 3 months correlation between AmerisourceBergen and Align is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding AmerisourceBergen and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and AmerisourceBergen 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 AmerisourceBergen 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 AmerisourceBergen i.e., AmerisourceBergen and Align Technology go up and down completely randomly.

Pair Corralation between AmerisourceBergen and Align Technology

Considering the 90-day investment horizon AmerisourceBergen is expected to generate 0.32 times more return on investment than Align Technology. However, AmerisourceBergen is 3.11 times less risky than Align Technology. It trades about 0.09 of its potential returns per unit of risk. Align Technology is currently generating about 0.03 per unit of risk. If you would invest  17,061  in AmerisourceBergen on January 19, 2024 and sell it today you would earn a total of  937.00  from holding AmerisourceBergen or generate 5.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	29.96%
Values	Daily Returns

AmerisourceBergen  vs.  Align Technology

AmerisourceBergen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AmerisourceBergen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, AmerisourceBergen is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Align Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Align Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AmerisourceBergen and Align Technology

The main advantage of trading using opposite AmerisourceBergen and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AmerisourceBergen 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 AmerisourceBergen 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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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.