Correlation Between Adapthealth Corp and Align Technology

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

Diversification Opportunities for Adapthealth Corp and Align Technology

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Adapthealth and Align is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Adapthealth Corp and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and Adapthealth Corp 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 Adapthealth Corp 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 Adapthealth Corp i.e., Adapthealth Corp and Align Technology go up and down completely randomly.

Pair Corralation between Adapthealth Corp and Align Technology

Given the investment horizon of 90 days Adapthealth Corp is expected to generate 1.2 times more return on investment than Align Technology. However, Adapthealth Corp is 1.2 times more volatile than Align Technology. It trades about 0.01 of its potential returns per unit of risk. Align Technology is currently generating about 0.0 per unit of risk. If you would invest  1,533  in Adapthealth Corp on December 29, 2023 and sell it today you would lose (397.00) from holding Adapthealth Corp or give up 25.9% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Adapthealth Corp  vs.  Align Technology

 Performance 
       Timeline  
Adapthealth Corp 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Adapthealth Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Adapthealth Corp displayed solid returns over the last few months and may actually be approaching a breakup point.
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.

Adapthealth Corp and Align Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Adapthealth Corp and Align Technology

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

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