Correlation Between Ford and Agilent Technologies

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Can any of the company-specific risk be diversified away by investing in both Ford and Agilent Technologies 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 Ford and Agilent Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Agilent Technologies, you can compare the effects of market volatilities on Ford and Agilent Technologies 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 Ford with a short position of Agilent Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Agilent Technologies.

Diversification Opportunities for Ford and Agilent Technologies

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Ford and Agilent is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Ford 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 Ford Motor are associated (or correlated) with Agilent Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agilent Technologies has no effect on the direction of Ford i.e., Ford and Agilent Technologies go up and down completely randomly.

Pair Corralation between Ford and Agilent Technologies

Taking into account the 90-day investment horizon Ford is expected to generate 1.23 times less return on investment than Agilent Technologies. But when comparing it to its historical volatility, Ford Motor is 1.2 times less risky than Agilent Technologies. It trades about 0.2 of its potential returns per unit of risk. Agilent Technologies is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  12,595  in Agilent Technologies on September 10, 2022 and sell it today you would earn a total of  2,700  from holding Agilent Technologies or generate 21.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Agilent Technologies

 Performance (%) 
       Timeline  
Ford Motor 
Ford Performance
0 of 100
Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2023. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ford Price Channel

Agilent Technologies 
Agilent Performance
6 of 100
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 fragile basic indicators, Agilent Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Agilent Price Channel

Ford and Agilent Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ford and Agilent Technologies

The main advantage of trading using opposite Ford and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Agilent Technologies 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 Agilent Technologies will offset losses from the drop in Agilent Technologies' long position.
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The idea behind Ford Motor and Agilent Technologies 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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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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