Correlation Between Agilent Technologies and Acer Therapeutics

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

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

Diversification Opportunities for Agilent Technologies and Acer Therapeutics

-0.08

Correlation Coefficient

Agilent Technologies  Acer Therapeutics

Good diversification

The 3 months correlation between Agilent and Acer is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and Acer Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acer Therapeutics 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 Acer Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acer Therapeutics has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and Acer Therapeutics go up and down completely randomly.

Pair Corralation between Agilent Technologies and Acer Therapeutics

Taking into account the 90-day investment horizon Agilent Technologies is expected to generate 1.81 times less return on investment than Acer Therapeutics. But when comparing it to its historical volatility, Agilent Technologies is 4.64 times less risky than Acer Therapeutics. It trades about 0.02 of its potential returns per unit of risk. Acer Therapeutics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  218.00  in Acer Therapeutics on January 25, 2024 and sell it today you would lose (137.00) from holding Acer Therapeutics or give up 62.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.53%
Values	Daily Returns

Agilent Technologies  vs.  Acer Therapeutics

Agilent Technologies

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Agilent Technologies may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Acer Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acer Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Acer Therapeutics is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Agilent Technologies and Acer Therapeutics

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

The idea behind Agilent Technologies and Acer Therapeutics 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.