Correlation Between Agilent Technologies and Waters

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

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

Diversification Opportunities for Agilent Technologies and Waters

0.81

Correlation Coefficient

Agilent Technologies  Waters

Very poor diversification

The 3 months correlation between Agilent and Waters is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters 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 Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and Waters go up and down completely randomly.

Pair Corralation between Agilent Technologies and Waters

Taking into account the 90-day investment horizon Agilent Technologies is expected to under-perform the Waters. But the stock apears to be less risky and, when comparing its historical volatility, Agilent Technologies is 1.12 times less risky than Waters. The stock trades about -0.11 of its potential returns per unit of risk. The Waters is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  37,460  in Waters on December 27, 2024 and sell it today you would lose (681.00) from holding Waters or give up 1.82% of portfolio value over 90 days.

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

Agilent Technologies  vs.  Waters

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. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Waters

Risk-Adjusted Performance

Very Weak

Over the last 90 days Waters has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Waters is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Agilent Technologies and Waters

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

The idea behind Agilent Technologies and Waters 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.