Correlation Between Agilent Technologies and Select Medical

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

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

Diversification Opportunities for Agilent Technologies and Select Medical

0.85

Correlation Coefficient

Agilent Technologies  Select Medical

Very poor diversification

The 3 months correlation between Agilent and Select is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and Select Medical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Medical Holdings 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 Select Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Medical Holdings has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and Select Medical go up and down completely randomly.

Pair Corralation between Agilent Technologies and Select Medical

Taking into account the 90-day investment horizon Agilent Technologies is expected to under-perform the Select Medical. But the stock apears to be less risky and, when comparing its historical volatility, Agilent Technologies is 1.0 times less risky than Select Medical. The stock trades about -0.11 of its potential returns per unit of risk. The Select Medical Holdings is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,885  in Select Medical Holdings on January 25, 2024 and sell it today you would lose (68.00) from holding Select Medical Holdings or give up 2.36% of portfolio value over 90 days.

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

Agilent Technologies  vs.  Select Medical Holdings

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.

Select Medical Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Select Medical Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Select Medical may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Agilent Technologies and Select Medical

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

The idea behind Agilent Technologies and Select Medical 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..