Correlation Between T2 Biosystms and Agilent Technologies

Can any of the company-specific risk be diversified away by investing in both T2 Biosystms 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 T2 Biosystms and Agilent Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between T2 Biosystms and Agilent Technologies, you can compare the effects of market volatilities on T2 Biosystms 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 T2 Biosystms with a short position of Agilent Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of T2 Biosystms and Agilent Technologies.

Diversification Opportunities for T2 Biosystms and Agilent Technologies

0.78

Correlation Coefficient

T2 Biosystms  Agilent Technologies

Poor diversification

The 3 months correlation between TTOO and Agilent is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding T2 Biosystms and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and T2 Biosystms 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 T2 Biosystms 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 T2 Biosystms i.e., T2 Biosystms and Agilent Technologies go up and down completely randomly.

Pair Corralation between T2 Biosystms and Agilent Technologies

Given the investment horizon of 90 days T2 Biosystms is expected to generate 15.2 times more return on investment than Agilent Technologies. However, T2 Biosystms is 15.2 times more volatile than Agilent Technologies. It trades about 0.03 of its potential returns per unit of risk. Agilent Technologies is currently generating about -0.07 per unit of risk. If you would invest  33.00  in T2 Biosystms on December 19, 2024 and sell it today you would lose (15.00) from holding T2 Biosystms or give up 45.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	71.67%
Values	Daily Returns

T2 Biosystms  vs.  Agilent Technologies

T2 Biosystms

Risk-Adjusted Performance

Weak

Over the last 90 days T2 Biosystms has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, T2 Biosystms displayed solid returns over the last few months and may actually be approaching a breakup point.

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 T2 Biosystms and Agilent Technologies

The main advantage of trading using opposite T2 Biosystms and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T2 Biosystms 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 T2 Biosystms 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.