Correlation Between Align Technology and Oracle

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

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

Diversification Opportunities for Align Technology and Oracle

0.41

Correlation Coefficient

Align Technology  Oracle

Very weak diversification

The 3 months correlation between Align and Oracle is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle 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 Oracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle has no effect on the direction of Align Technology i.e., Align Technology and Oracle go up and down completely randomly.

Pair Corralation between Align Technology and Oracle

Assuming the 90 days trading horizon Align Technology is expected to under-perform the Oracle. But the stock apears to be less risky and, when comparing its historical volatility, Align Technology is 1.32 times less risky than Oracle. The stock trades about -0.01 of its potential returns per unit of risk. The Oracle is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  15,299  in Oracle on September 29, 2024 and sell it today you would earn a total of  2,301  from holding Oracle or generate 15.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Align Technology  vs.  Oracle

Align Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Align Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Align Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oracle

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Oracle sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Align Technology and Oracle

The main advantage of trading using opposite Align Technology and Oracle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Align Technology position performs unexpectedly, Oracle 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 Oracle will offset losses from the drop in Oracle's long position.

The idea behind Align Technology and Oracle 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.