Correlation Between Align Technology and LPL Financial

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

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

Diversification Opportunities for Align Technology and LPL Financial

0.45

Correlation Coefficient

Align Technology  LPL Financial

Very weak diversification

The 3 months correlation between Align and LPL is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and LPL Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPL Financial Holdings 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 LPL Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPL Financial Holdings has no effect on the direction of Align Technology i.e., Align Technology and LPL Financial go up and down completely randomly.

Pair Corralation between Align Technology and LPL Financial

Assuming the 90 days trading horizon Align Technology is expected to generate 0.8 times more return on investment than LPL Financial. However, Align Technology is 1.25 times less risky than LPL Financial. It trades about 0.43 of its potential returns per unit of risk. LPL Financial Holdings is currently generating about 0.07 per unit of risk. If you would invest  24,298  in Align Technology on April 22, 2025 and sell it today you would earn a total of  3,826  from holding Align Technology or generate 15.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Align Technology  vs.  LPL Financial Holdings

Align Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Align Technology may actually be approaching a critical reversion point that can send shares even higher in August 2025.

LPL Financial Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LPL Financial Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LPL Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Align Technology and LPL Financial

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

The idea behind Align Technology and LPL Financial Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.