Correlation Between Ametek and Agilent Technologies

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

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

Diversification Opportunities for Ametek and Agilent Technologies

0.8

Correlation Coefficient

Ametek  Agilent Technologies

Very poor diversification

The 3 months correlation between Ametek and Agilent is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ametek Inc and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Ametek 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 Ametek Inc 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 Ametek i.e., Ametek and Agilent Technologies go up and down completely randomly.

Pair Corralation between Ametek and Agilent Technologies

Considering the 90-day investment horizon Ametek Inc is expected to generate 0.38 times more return on investment than Agilent Technologies. However, Ametek Inc is 2.63 times less risky than Agilent Technologies. It trades about -0.12 of its potential returns per unit of risk. Agilent Technologies is currently generating about -0.15 per unit of risk. If you would invest  18,046  in Ametek Inc on January 30, 2024 and sell it today you would lose (295.00) from holding Ametek Inc or give up 1.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Ametek Inc  vs.  Agilent Technologies

Ametek Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ametek Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal primary indicators, Ametek may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Agilent Technologies

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 2 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ametek and Agilent Technologies

The main advantage of trading using opposite Ametek and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ametek 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 Ametek Inc 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.