Correlation Between Agilent Technologies and Microsoft

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Can any of the company-specific risk be diversified away by investing in both Agilent Technologies and Microsoft 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 Agilent Technologies and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Agilent Technologies and Microsoft, you can compare the effects of market volatilities on Agilent Technologies and Microsoft 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 Agilent Technologies with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agilent Technologies and Microsoft.

Diversification Opportunities for Agilent Technologies and Microsoft

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Agilent and Microsoft is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Agilent Technologies 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 Agilent Technologies are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and Microsoft go up and down completely randomly.

Pair Corralation between Agilent Technologies and Microsoft

Taking into account the 90-day investment horizon Agilent Technologies is expected to generate 3.93 times less return on investment than Microsoft. In addition to that, Agilent Technologies is 1.18 times more volatile than Microsoft. It trades about 0.03 of its total potential returns per unit of risk. Microsoft is currently generating about 0.12 per unit of volatility. If you would invest  28,489  in Microsoft on December 29, 2023 and sell it today you would earn a total of  13,654  from holding Microsoft or generate 47.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Agilent Technologies  vs.  Microsoft

 Performance 
       Timeline  
Agilent Technologies 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
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 unfluctuating basic indicators, Agilent Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Microsoft 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Agilent Technologies and Microsoft Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Agilent Technologies and Microsoft

The main advantage of trading using opposite Agilent Technologies and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agilent Technologies position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.
The idea behind Agilent Technologies and Microsoft 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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