Correlation Between Ford and Agilent Technologies

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

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

Diversification Opportunities for Ford and Agilent Technologies

0.7

Correlation Coefficient

Ford  Agilent Technologies

Poor diversification

The 3 months correlation between Ford and Agilent is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Ford 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 Ford Motor 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 Ford i.e., Ford and Agilent Technologies go up and down completely randomly.

Pair Corralation between Ford and Agilent Technologies

Taking into account the 90-day investment horizon Ford is expected to generate 1.61 times less return on investment than Agilent Technologies. In addition to that, Ford is 1.32 times more volatile than Agilent Technologies. It trades about 0.01 of its total potential returns per unit of risk. Agilent Technologies is currently generating about 0.02 per unit of volatility. If you would invest  11,763  in Agilent Technologies on January 19, 2024 and sell it today you would earn a total of  1,692  from holding Agilent Technologies or generate 14.38% return on investment over 90 days.

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

Ford Motor  vs.  Agilent Technologies

Ford Motor

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford 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

Weak

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and Agilent Technologies

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

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.