Correlation Between IDEX and Agilent Technologies

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

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

Diversification Opportunities for IDEX and Agilent Technologies

0.8

Correlation Coefficient

IDEX  Agilent Technologies

Very poor diversification

The 3 months correlation between IDEX and Agilent is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and IDEX 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 IDEX Corporation 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 IDEX i.e., IDEX and Agilent Technologies go up and down completely randomly.

Pair Corralation between IDEX and Agilent Technologies

Considering the 90-day investment horizon IDEX Corporation is expected to under-perform the Agilent Technologies. But the stock apears to be less risky and, when comparing its historical volatility, IDEX Corporation is 1.47 times less risky than Agilent Technologies. The stock trades about -0.3 of its potential returns per unit of risk. The Agilent Technologies is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  14,418  in Agilent Technologies on January 26, 2024 and sell it today you would lose (669.00) from holding Agilent Technologies or give up 4.64% of portfolio value over 90 days.

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

IDEX Corp.  vs.  Agilent Technologies

IDEX

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IDEX Corporation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, IDEX may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Agilent Technologies

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Agilent Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IDEX and Agilent Technologies

The main advantage of trading using opposite IDEX and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX 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.

The idea behind IDEX Corporation 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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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.