Correlation Between Thermo Fisher and Agilent Technologies

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

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

Diversification Opportunities for Thermo Fisher and Agilent Technologies

0.42

Correlation Coefficient

Thermo Fisher  Agilent Technologies

Very weak diversification

The 3 months correlation between Thermo and Agilent is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Thermo Fisher Scientific and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Thermo Fisher 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 Thermo Fisher Scientific 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 Thermo Fisher i.e., Thermo Fisher and Agilent Technologies go up and down completely randomly.

Pair Corralation between Thermo Fisher and Agilent Technologies

Assuming the 90 days horizon Thermo Fisher is expected to generate 1.93 times less return on investment than Agilent Technologies. But when comparing it to its historical volatility, Thermo Fisher Scientific is 1.25 times less risky than Agilent Technologies. It trades about 0.01 of its potential returns per unit of risk. Agilent Technologies is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  13,123  in Agilent Technologies on October 23, 2024 and sell it today you would earn a total of  1,147  from holding Agilent Technologies or generate 8.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Thermo Fisher Scientific  vs.  Agilent Technologies

Thermo Fisher Scientific

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thermo Fisher Scientific are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Thermo Fisher is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Thermo Fisher and Agilent Technologies

The main advantage of trading using opposite Thermo Fisher and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thermo Fisher 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 Thermo Fisher Scientific 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 CEOs Directory module to screen CEOs from public companies around the world.