Correlation Between Agilent Technologies and AbbVie

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

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

Diversification Opportunities for Agilent Technologies and AbbVie

0.59

Correlation Coefficient

Agilent Technologies  AbbVie

Very weak diversification

The 3 months correlation between Agilent and AbbVie is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc and Agilent Technologies 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 Agilent Technologies are associated (or correlated) with AbbVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbbVie Inc has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and AbbVie go up and down completely randomly.

Pair Corralation between Agilent Technologies and AbbVie

Taking into account the 90-day investment horizon Agilent Technologies is expected to generate 1.04 times less return on investment than AbbVie. In addition to that, Agilent Technologies is 1.48 times more volatile than AbbVie Inc. It trades about 0.02 of its total potential returns per unit of risk. AbbVie Inc is currently generating about 0.04 per unit of volatility. If you would invest  13,588  in AbbVie Inc on January 19, 2024 and sell it today you would earn a total of  2,837  from holding AbbVie Inc or generate 20.88% return on investment over 90 days.

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

Agilent Technologies  vs.  AbbVie Inc

Agilent Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Agilent Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

AbbVie Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AbbVie Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental drivers, AbbVie is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Agilent Technologies and AbbVie

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

The idea behind Agilent Technologies and AbbVie Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.