Correlation Between Fras Le and Agilent Technologies
Can any of the company-specific risk be diversified away by investing in both Fras Le 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 Fras Le and Agilent Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fras le SA and Agilent Technologies, you can compare the effects of market volatilities on Fras Le 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 Fras Le with a short position of Agilent Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fras Le and Agilent Technologies.
Diversification Opportunities for Fras Le and Agilent Technologies
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fras and Agilent is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Fras Le 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 Fras le SA 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 Fras Le i.e., Fras Le and Agilent Technologies go up and down completely randomly.
Pair Corralation between Fras Le and Agilent Technologies
Assuming the 90 days trading horizon Fras le SA is expected to under-perform the Agilent Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Fras le SA is 1.32 times less risky than Agilent Technologies. The stock trades about -0.18 of its potential returns per unit of risk. The Agilent Technologies is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 41,360 in Agilent Technologies on August 28, 2024 and sell it today you would lose (1,073) from holding Agilent Technologies or give up 2.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fras le SA vs. Agilent Technologies
Performance |
| Timeline |
| Fras le SA |
| Agilent Technologies |
Fras Le and Agilent Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fras Le and Agilent Technologies
The main advantage of trading using opposite Fras Le and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fras Le 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 Fras le SA 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.| Agilent Technologies vs. Raytheon Technologies | Agilent Technologies vs. Dell Technologies | Agilent Technologies vs. METISA Metalrgica Timboense | Agilent Technologies vs. Monster Beverage |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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