Correlation Between ResMed and Agilent Technologies

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

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

Diversification Opportunities for ResMed and Agilent Technologies

0.45

Correlation Coefficient

ResMed  Agilent Technologies

Very weak diversification

The 3 months correlation between ResMed and Agilent is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding ResMed Inc and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and ResMed 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 ResMed 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 ResMed i.e., ResMed and Agilent Technologies go up and down completely randomly.

Pair Corralation between ResMed and Agilent Technologies

Considering the 90-day investment horizon ResMed Inc is expected to generate 2.74 times more return on investment than Agilent Technologies. However, ResMed is 2.74 times more volatile than Agilent Technologies. It trades about 0.13 of its potential returns per unit of risk. Agilent Technologies is currently generating about -0.15 per unit of risk. If you would invest  18,932  in ResMed Inc on January 30, 2024 and sell it today you would earn a total of  2,277  from holding ResMed Inc or generate 12.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

ResMed Inc  vs.  Agilent Technologies

ResMed Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, ResMed exhibited solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with ResMed and Agilent Technologies

The main advantage of trading using opposite ResMed and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ResMed 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 ResMed 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.