Correlation Between Agilent Technologies and Sensata Technologies

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

Diversification Opportunities for Agilent Technologies and Sensata Technologies

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Agilent and Sensata is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and Sensata Technologies Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensata Technologies 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 Sensata Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensata Technologies has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and Sensata Technologies go up and down completely randomly.

Pair Corralation between Agilent Technologies and Sensata Technologies

Taking into account the 90-day investment horizon Agilent Technologies is expected to generate 0.92 times more return on investment than Sensata Technologies. However, Agilent Technologies is 1.09 times less risky than Sensata Technologies. It trades about 0.07 of its potential returns per unit of risk. Sensata Technologies Holding is currently generating about -0.03 per unit of risk. If you would invest  11,769  in Agilent Technologies on December 30, 2023 and sell it today you would earn a total of  2,782  from holding Agilent Technologies or generate 23.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Agilent Technologies  vs.  Sensata Technologies Holding

 Performance 
       Timeline  
Agilent Technologies 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Agilent Technologies is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Sensata Technologies 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Sensata Technologies Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sensata Technologies is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Agilent Technologies and Sensata Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Agilent Technologies and Sensata Technologies

The main advantage of trading using opposite Agilent Technologies and Sensata Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agilent Technologies position performs unexpectedly, Sensata 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 Sensata Technologies will offset losses from the drop in Sensata Technologies' long position.
The idea behind Agilent Technologies and Sensata Technologies Holding 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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