Correlation Between Agilent Technologies and Cummins

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

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

Diversification Opportunities for Agilent Technologies and Cummins

0.13

Correlation Coefficient

Agilent Technologies  Cummins

Average diversification

The 3 months correlation between Agilent and Cummins is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins 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 Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and Cummins go up and down completely randomly.

Pair Corralation between Agilent Technologies and Cummins

Assuming the 90 days trading horizon Agilent Technologies is expected to generate 2.66 times more return on investment than Cummins. However, Agilent Technologies is 2.66 times more volatile than Cummins. It trades about 0.2 of its potential returns per unit of risk. Cummins is currently generating about -0.4 per unit of risk. If you would invest  40,287  in Agilent Technologies on October 12, 2024 and sell it today you would earn a total of  1,469  from holding Agilent Technologies or generate 3.65% return on investment over 90 days.

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

Agilent Technologies  vs.  Cummins

Agilent Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Cummins

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cummins are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Cummins sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agilent Technologies and Cummins

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

The idea behind Agilent Technologies and Cummins 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.