Correlation Between Exxon and Agilent Technologies

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

Diversification Opportunities for Exxon and Agilent Technologies

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Exxon and Agilent is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Exxon 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 Exxon Mobil 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 Exxon i.e., Exxon and Agilent Technologies go up and down completely randomly.

Pair Corralation between Exxon and Agilent Technologies

Considering the 90-day investment horizon Exxon is expected to generate 1.87 times less return on investment than Agilent Technologies. In addition to that, Exxon is 1.08 times more volatile than Agilent Technologies. It trades about 0.18 of its total potential returns per unit of risk. Agilent Technologies is currently generating about 0.35 per unit of volatility. If you would invest  11,511  in Agilent Technologies on May 17, 2022 and sell it today you would earn a total of  1,905  from holding Agilent Technologies or generate 16.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Agilent Technologies

 Performance (%) 
       Timeline  
Exxon Mobil Corp 
Exxon Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Exxon is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Exxon Price Channel

Agilent Technologies 
Agilent Performance
5 of 100
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 sluggish basic indicators, Agilent Technologies may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Agilent Price Channel

Exxon and Agilent Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Agilent Technologies

The main advantage of trading using opposite Exxon and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 Exxon Mobil 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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