Correlation Between Agilent Technologies and Danaher

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

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

Diversification Opportunities for Agilent Technologies and Danaher

0.64

Correlation Coefficient

Agilent Technologies  Danaher

Poor diversification

The 3 months correlation between Agilent and Danaher is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and Danaher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaher 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 Danaher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaher has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and Danaher go up and down completely randomly.

Pair Corralation between Agilent Technologies and Danaher

Taking into account the 90-day investment horizon Agilent Technologies is expected to generate 1.19 times more return on investment than Danaher. However, Agilent Technologies is 1.19 times more volatile than Danaher. It trades about -0.13 of its potential returns per unit of risk. Danaher is currently generating about -0.2 per unit of risk. If you would invest  14,585  in Agilent Technologies on January 17, 2024 and sell it today you would lose (563.00) from holding Agilent Technologies or give up 3.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Agilent Technologies  vs.  Danaher

Agilent Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Agilent Technologies may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Danaher

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Danaher are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical indicators, Danaher may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Agilent Technologies and Danaher

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

The idea behind Agilent Technologies and Danaher 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.