Correlation Between Agilent Technologies and Empire Metals

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

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

Diversification Opportunities for Agilent Technologies and Empire Metals

-0.52

Correlation Coefficient

Agilent Technologies  Empire Metals

Excellent diversification

The 3 months correlation between Agilent and Empire is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited and Agilent Technologies 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 Agilent Technologies are associated (or correlated) with Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and Empire Metals go up and down completely randomly.

Pair Corralation between Agilent Technologies and Empire Metals

Assuming the 90 days trading horizon Agilent Technologies is expected to under-perform the Empire Metals. But the stock apears to be less risky and, when comparing its historical volatility, Agilent Technologies is 2.36 times less risky than Empire Metals. The stock trades about -0.11 of its potential returns per unit of risk. The Empire Metals Limited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  655.00  in Empire Metals Limited on December 24, 2024 and sell it today you would earn a total of  475.00  from holding Empire Metals Limited or generate 72.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Agilent Technologies  vs.  Empire Metals Limited

Agilent Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agilent Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Empire Metals Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Metals Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Empire Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agilent Technologies and Empire Metals

The main advantage of trading using opposite Agilent Technologies and Empire Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agilent Technologies position performs unexpectedly, Empire Metals 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 Empire Metals will offset losses from the drop in Empire Metals' long position.

The idea behind Agilent Technologies and Empire Metals Limited 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.