Correlation Between Select Medical and Agilent Technologies

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

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

Diversification Opportunities for Select Medical and Agilent Technologies

0.85

Correlation Coefficient

Select Medical  Agilent Technologies

Very poor diversification

The 3 months correlation between Select and Agilent is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Select Medical Holdings and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Select Medical 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 Select Medical Holdings 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 Select Medical i.e., Select Medical and Agilent Technologies go up and down completely randomly.

Pair Corralation between Select Medical and Agilent Technologies

Considering the 90-day investment horizon Select Medical Holdings is expected to generate 1.25 times more return on investment than Agilent Technologies. However, Select Medical is 1.25 times more volatile than Agilent Technologies. It trades about 0.03 of its potential returns per unit of risk. Agilent Technologies is currently generating about 0.02 per unit of risk. If you would invest  2,228  in Select Medical Holdings on January 24, 2024 and sell it today you would earn a total of  505.00  from holding Select Medical Holdings or generate 22.67% return on investment over 90 days.

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

Select Medical Holdings  vs.  Agilent Technologies

Select Medical Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Select Medical Holdings are ranked lower than 4 (%) 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.

Agilent Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 3 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Select Medical and Agilent Technologies

The main advantage of trading using opposite Select Medical and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Medical 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 Select Medical Holdings 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 the Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..