Correlation Between Agilent Technologies and Costco Wholesale

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

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

Diversification Opportunities for Agilent Technologies and Costco Wholesale

0.15

Correlation Coefficient

Agilent Technologies  Costco Wholesale

Average diversification

The 3 months correlation between Agilent and Costco is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale 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 Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and Costco Wholesale go up and down completely randomly.

Pair Corralation between Agilent Technologies and Costco Wholesale

Assuming the 90 days trading horizon Agilent Technologies is expected to generate 69.7 times less return on investment than Costco Wholesale. But when comparing it to its historical volatility, Agilent Technologies is 17.52 times less risky than Costco Wholesale. It trades about 0.11 of its potential returns per unit of risk. Costco Wholesale is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  12,880  in Costco Wholesale on September 5, 2024 and sell it today you would earn a total of  2,045  from holding Costco Wholesale or generate 15.88% 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.  Costco Wholesale

Agilent Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Agilent Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Costco Wholesale

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Costco Wholesale sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agilent Technologies and Costco Wholesale

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

The idea behind Agilent Technologies and Costco Wholesale 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.