Correlation Between Disney and Agilent Technologies

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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

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Disney and Agilent is 0.64. 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 Disney is expected to generate 1.06 times less return on investment than Agilent Technologies. But when comparing it to its historical volatility, Walt Disney is 1.21 times less risky than Agilent Technologies. It trades about 0.41 of its potential returns per unit of risk. Agilent Technologies is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  13,255  in Agilent Technologies on December 29, 2023 and sell it today you would earn a total of  1,482  from holding Agilent Technologies or generate 11.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  Agilent Technologies

 Performance 
       Timeline  
Walt Disney 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.
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.

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.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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