Correlation Between Agilent Technologies and International Biotechnology

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

By analyzing existing cross correlation between Agilent Technologies and International Biotechnology Trust, you can compare the effects of market volatilities on Agilent Technologies and International Biotechnology 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 International Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agilent Technologies and International Biotechnology.

Diversification Opportunities for Agilent Technologies and International Biotechnology

0.8

Correlation Coefficient

Agilent Technologies  International Biotechnology

Very poor diversification

The 3 months correlation between Agilent and International is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and International Biotechnology Tr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Biotechnology 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 International Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Biotechnology has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and International Biotechnology go up and down completely randomly.

Pair Corralation between Agilent Technologies and International Biotechnology

Assuming the 90 days trading horizon Agilent Technologies is expected to under-perform the International Biotechnology. In addition to that, Agilent Technologies is 1.48 times more volatile than International Biotechnology Trust. It trades about -0.11 of its total potential returns per unit of risk. International Biotechnology Trust is currently generating about -0.06 per unit of volatility. If you would invest  68,000  in International Biotechnology Trust on December 27, 2024 and sell it today you would lose (3,200) from holding International Biotechnology Trust or give up 4.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Agilent Technologies  vs.  International Biotechnology Tr

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 unsteady 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.

International Biotechnology

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Biotechnology Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, International Biotechnology is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Agilent Technologies and International Biotechnology

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

The idea behind Agilent Technologies and International Biotechnology Trust 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.