Correlation Between Microsoft Corp and Agilent Technologies

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

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

Diversification Opportunities for Microsoft Corp and Agilent Technologies

0.56
  Correlation Coefficient
Microsoft Corp
Agilent Technologies

Very weak diversification

The 3 months correlation between Microsoft and Agilent is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and Agilent Technologies in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Microsoft Corp 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 Microsoft Corp 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 Microsoft Corp i.e., Microsoft Corp and Agilent Technologies go up and down completely randomly.

Pair Corralation between Microsoft Corp and Agilent Technologies

Given the investment horizon of 90 days Microsoft Corp is expected to generate 1.08 times more return on investment than Agilent Technologies. However, Microsoft Corp is 1.08 times more volatile than Agilent Technologies. It trades about -0.11 of its potential returns per unit of risk. Agilent Technologies is currently generating about -0.12 per unit of risk. If you would invest  32,380  in Microsoft Corp on October 18, 2021 and sell it today you would lose (1,360)  from holding Microsoft Corp or give up 4.2% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Microsoft Corp  vs.  Agilent Technologies

 Performance (%) 
      Timeline 
Microsoft Corp 
Microsoft Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft Price Channel

Agilent Technologies 
Agilent Performance
0 of 100
Over the last 90 days Agilent Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Agilent Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Agilent Price Channel

Microsoft Corp and Agilent Technologies Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Microsoft Corp and Agilent Technologies

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

Microsoft Corp

Pair trading matchups for Microsoft Corp

The idea behind Microsoft Corp 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.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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