Correlation Between ScanSource and Agilent Technologies

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

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

Diversification Opportunities for ScanSource and Agilent Technologies

0.53

Correlation Coefficient

ScanSource  Agilent Technologies

Very weak diversification

The 3 months correlation between ScanSource and Agilent is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and ScanSource 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 ScanSource 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 ScanSource i.e., ScanSource and Agilent Technologies go up and down completely randomly.

Pair Corralation between ScanSource and Agilent Technologies

Assuming the 90 days horizon ScanSource is expected to generate 1.69 times less return on investment than Agilent Technologies. In addition to that, ScanSource is 1.22 times more volatile than Agilent Technologies. It trades about 0.25 of its total potential returns per unit of risk. Agilent Technologies is currently generating about 0.53 per unit of volatility. If you would invest  12,881  in Agilent Technologies on October 24, 2024 and sell it today you would earn a total of  1,389  from holding Agilent Technologies or generate 10.78% return on investment over 90 days.

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

ScanSource  vs.  Agilent Technologies

ScanSource

Risk-Adjusted Performance

8 of 100

OK

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

Agilent Technologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Agilent Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ScanSource and Agilent Technologies

The main advantage of trading using opposite ScanSource and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ScanSource 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 ScanSource 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.