Correlation Between Stryker and Align Technology

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

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

Diversification Opportunities for Stryker and Align Technology

0.72

Correlation Coefficient

Stryker  Align Technology

Poor diversification

The 3 months correlation between Stryker and Align is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Stryker and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and Stryker 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 Stryker 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 Stryker i.e., Stryker and Align Technology go up and down completely randomly.

Pair Corralation between Stryker and Align Technology

Considering the 90-day investment horizon Stryker is expected to generate 0.5 times more return on investment than Align Technology. However, Stryker is 1.99 times less risky than Align Technology. It trades about -0.1 of its potential returns per unit of risk. Align Technology is currently generating about -0.22 per unit of risk. If you would invest  33,913  in Stryker on February 13, 2024 and sell it today you would lose (855.00) from holding Stryker or give up 2.52% of portfolio value over 90 days.

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

Stryker  vs.  Align Technology

Stryker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stryker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Stryker is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

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. In spite of very healthy technical and fundamental indicators, Align Technology is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Stryker and Align Technology

The main advantage of trading using opposite Stryker and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stryker 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 Stryker 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.