Correlation Between Danaher and Agilent Technologies

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

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

Diversification Opportunities for Danaher and Agilent Technologies

0.12

Correlation Coefficient

Danaher  Agilent Technologies

Average diversification

The 3 months correlation between Danaher and Agilent is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Danaher and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Danaher 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 Danaher 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 Danaher i.e., Danaher and Agilent Technologies go up and down completely randomly.

Pair Corralation between Danaher and Agilent Technologies

Assuming the 90 days trading horizon Danaher is expected to generate 2.3 times more return on investment than Agilent Technologies. However, Danaher is 2.3 times more volatile than Agilent Technologies. It trades about 0.09 of its potential returns per unit of risk. Agilent Technologies is currently generating about 0.13 per unit of risk. If you would invest  4,913  in Danaher on September 25, 2024 and sell it today you would earn a total of  172.00  from holding Danaher or generate 3.5% return on investment over 90 days.

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

Danaher  vs.  Agilent Technologies

Danaher

Risk-Adjusted Performance

0 of 100

Very Weak

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

Agilent Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 5 (%) 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 Danaher and Agilent Technologies

The main advantage of trading using opposite Danaher and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danaher 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 Danaher 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.