Correlation Between Waters and Agilent Technologies

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

Diversification Opportunities for Waters and Agilent Technologies

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Waters and Agilent is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Waters 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 Waters 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 Waters i.e., Waters and Agilent Technologies go up and down completely randomly.

Pair Corralation between Waters and Agilent Technologies

Considering the 90-day investment horizon Waters is expected to generate 2.73 times less return on investment than Agilent Technologies. In addition to that, Waters is 1.17 times more volatile than Agilent Technologies. It trades about 0.11 of its total potential returns per unit of risk. Agilent Technologies is currently generating about 0.36 per unit of volatility. If you would invest  13,255  in Agilent Technologies on December 29, 2023 and sell it today you would earn a total of  1,482  from holding Agilent Technologies or generate 11.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Waters  vs.  Agilent Technologies

 Performance 
       Timeline  
Waters 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Waters is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
Agilent Technologies 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Agilent Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Waters and Agilent Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Waters and Agilent Technologies

The main advantage of trading using opposite Waters and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters 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 Waters 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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