Correlation Between Quest Diagnostics and Agilent Technologies

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

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

Diversification Opportunities for Quest Diagnostics and Agilent Technologies

-0.5

Correlation Coefficient

Quest Diagnostics  Agilent Technologies

Very good diversification

The 3 months correlation between Quest and Agilent is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Quest Diagnostics Incorporated and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Quest Diagnostics 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 Quest Diagnostics Incorporated 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 Quest Diagnostics i.e., Quest Diagnostics and Agilent Technologies go up and down completely randomly.

Pair Corralation between Quest Diagnostics and Agilent Technologies

Considering the 90-day investment horizon Quest Diagnostics Incorporated is expected to generate 0.89 times more return on investment than Agilent Technologies. However, Quest Diagnostics Incorporated is 1.12 times less risky than Agilent Technologies. It trades about 0.11 of its potential returns per unit of risk. Agilent Technologies is currently generating about -0.11 per unit of risk. If you would invest  15,189  in Quest Diagnostics Incorporated on December 27, 2024 and sell it today you would earn a total of  1,473  from holding Quest Diagnostics Incorporated or generate 9.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Quest Diagnostics Incorporated  vs.  Agilent Technologies

Quest Diagnostics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quest Diagnostics Incorporated are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Quest Diagnostics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Quest Diagnostics and Agilent Technologies

The main advantage of trading using opposite Quest Diagnostics and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quest Diagnostics 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 Quest Diagnostics Incorporated 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.