Correlation Between Agilent Technologies and Meta Platforms

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

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

Diversification Opportunities for Agilent Technologies and Meta Platforms

0.69

Correlation Coefficient

Agilent Technologies  Meta Platforms

Poor diversification

The 3 months correlation between Agilent and Meta is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and Meta Platforms go up and down completely randomly.

Pair Corralation between Agilent Technologies and Meta Platforms

Taking into account the 90-day investment horizon Agilent Technologies is expected to under-perform the Meta Platforms. But the stock apears to be less risky and, when comparing its historical volatility, Agilent Technologies is 1.05 times less risky than Meta Platforms. The stock trades about -0.11 of its potential returns per unit of risk. The Meta Platforms is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  50,302  in Meta Platforms on January 25, 2024 and sell it today you would lose (692.00) from holding Meta Platforms or give up 1.38% of portfolio value over 90 days.

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

Agilent Technologies  vs.  Meta Platforms

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.

Meta Platforms

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Meta Platforms sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agilent Technologies and Meta Platforms

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

The idea behind Agilent Technologies and Meta Platforms 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.