Correlation Between Align Technology and Paychex

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

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

Diversification Opportunities for Align Technology and Paychex

-0.17

Correlation Coefficient

Align Technology  Paychex

Good diversification

The 3 months correlation between Align and Paychex is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Paychex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paychex 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 Paychex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paychex has no effect on the direction of Align Technology i.e., Align Technology and Paychex go up and down completely randomly.

Pair Corralation between Align Technology and Paychex

Assuming the 90 days horizon Align Technology is expected to under-perform the Paychex. In addition to that, Align Technology is 1.38 times more volatile than Paychex. It trades about -0.03 of its total potential returns per unit of risk. Paychex is currently generating about 0.16 per unit of volatility. If you would invest  11,732  in Paychex on September 20, 2024 and sell it today you would earn a total of  1,608  from holding Paychex or generate 13.71% return on investment over 90 days.

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

Align Technology  vs.  Paychex

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 nearly stable basic indicators, Align Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Paychex

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paychex are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Paychex reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Align Technology and Paychex

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

The idea behind Align Technology and Paychex 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 Commodity Directory module to find actively traded commodities issued by global exchanges.