Correlation Between Disney and Agilent Technologies
Can any of the company-specific risk be diversified away by investing in both Disney 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 Disney and Agilent Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Agilent Technologies, you can compare the effects of market volatilities on Disney 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 Disney with a short position of Agilent Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Agilent Technologies.
Diversification Opportunities for Disney and Agilent Technologies
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Disney and Agilent is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Disney 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 Walt Disney 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 Disney i.e., Disney and Agilent Technologies go up and down completely randomly.
Pair Corralation between Disney and Agilent Technologies
Considering the 90-day investment horizon Walt Disney is expected to generate 1.06 times more return on investment than Agilent Technologies. However, Disney is 1.06 times more volatile than Agilent Technologies. It trades about 0.04 of its potential returns per unit of risk. Agilent Technologies is currently generating about 0.01 per unit of risk. If you would invest 9,769 in Walt Disney on January 20, 2024 and sell it today you would earn a total of 1,474 from holding Walt Disney or generate 15.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walt Disney vs. Agilent Technologies
Performance |
| Timeline |
| Walt Disney |
| Agilent Technologies |
Disney and Agilent Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and Agilent Technologies
The main advantage of trading using opposite Disney and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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 Walt Disney 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. Oric PharmaceuticalsInc | Agilent Technologies vs. Anebulo Pharmaceuticals | Agilent Technologies vs. Cullinan Oncology LLC | Agilent Technologies vs. C4 TherapeuticsInc |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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