Correlation Between Align Technology and Agilent Technologies

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

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

Diversification Opportunities for Align Technology and Agilent Technologies

0.06

Correlation Coefficient

Align Technology  Agilent Technologies

Significant diversification

The 3 months correlation between Align and Agilent is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Align Technology 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 Align Technology are associated (or correlated) with Agilent Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agilent Technologies has no effect on the direction of Align Technology i.e., Align Technology and Agilent Technologies go up and down completely randomly.

Pair Corralation between Align Technology and Agilent Technologies

Assuming the 90 days trading horizon Align Technology is expected to generate 1.13 times less return on investment than Agilent Technologies. But when comparing it to its historical volatility, Align Technology is 1.05 times less risky than Agilent Technologies. It trades about 0.08 of its potential returns per unit of risk. Agilent Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  37,126  in Agilent Technologies on September 5, 2024 and sell it today you would earn a total of  3,161  from holding Agilent Technologies or generate 8.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Align Technology  vs.  Agilent Technologies

Align Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Align Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Align Technology and Agilent Technologies

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

The idea behind Align Technology and Agilent Technologies 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.