Correlation Between Agilent Technologies and American Airlines

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

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

Diversification Opportunities for Agilent Technologies and American Airlines

0.1

Correlation Coefficient

Agilent Technologies  American Airlines

Average diversification

The 3 months correlation between Agilent and American is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and American Airlines go up and down completely randomly.

Pair Corralation between Agilent Technologies and American Airlines

Assuming the 90 days trading horizon Agilent Technologies is expected to generate 0.75 times more return on investment than American Airlines. However, Agilent Technologies is 1.33 times less risky than American Airlines. It trades about 0.1 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.06 per unit of risk. If you would invest  27,633  in Agilent Technologies on September 28, 2024 and sell it today you would earn a total of  13,619  from holding Agilent Technologies or generate 49.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	68.48%
Values	Daily Returns

Agilent Technologies  vs.  American Airlines Group

Agilent Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agilent Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Agilent Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Airlines

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, American Airlines sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agilent Technologies and American Airlines

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

The idea behind Agilent Technologies and American Airlines Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.