Correlation Between Danaher and Align Technology

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

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

Diversification Opportunities for Danaher and Align Technology

0.25

Correlation Coefficient

Danaher  Align Technology

Modest diversification

The 3 months correlation between Danaher and Align is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Danaher and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and Danaher 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 Danaher 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 Danaher i.e., Danaher and Align Technology go up and down completely randomly.

Pair Corralation between Danaher and Align Technology

Considering the 90-day investment horizon Danaher is expected to generate 0.83 times more return on investment than Align Technology. However, Danaher is 1.21 times less risky than Align Technology. It trades about 0.05 of its potential returns per unit of risk. Align Technology is currently generating about -0.22 per unit of risk. If you would invest  24,425  in Danaher on February 8, 2024 and sell it today you would earn a total of  451.00  from holding Danaher or generate 1.85% return on investment over 90 days.

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

Danaher  vs.  Align Technology

Danaher

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Danaher are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, Danaher is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Align Technology

Risk-Adjusted Performance

0 of 100

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 latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Danaher and Align Technology

The main advantage of trading using opposite Danaher and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danaher 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 Danaher 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.