Correlation Between Agilent Technologies and Zai Lab

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

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

Diversification Opportunities for Agilent Technologies and Zai Lab

-0.84

Correlation Coefficient

Agilent Technologies  Zai Lab

Pay attention - limited upside

The 3 months correlation between Agilent and Zai is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and Zai Lab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zai Lab and Agilent Technologies 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 Agilent Technologies are associated (or correlated) with Zai Lab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zai Lab has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and Zai Lab go up and down completely randomly.

Pair Corralation between Agilent Technologies and Zai Lab

Taking into account the 90-day investment horizon Agilent Technologies is expected to under-perform the Zai Lab. But the stock apears to be less risky and, when comparing its historical volatility, Agilent Technologies is 1.87 times less risky than Zai Lab. The stock trades about -0.18 of its potential returns per unit of risk. The Zai Lab is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,530  in Zai Lab on January 3, 2025 and sell it today you would earn a total of  1,139  from holding Zai Lab or generate 45.02% return on investment over 90 days.

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

Agilent Technologies  vs.  Zai Lab

Agilent Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agilent Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Zai Lab

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zai Lab are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Zai Lab sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agilent Technologies and Zai Lab

The main advantage of trading using opposite Agilent Technologies and Zai Lab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agilent Technologies position performs unexpectedly, Zai Lab 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 Zai Lab will offset losses from the drop in Zai Lab's long position.

The idea behind Agilent Technologies and Zai Lab 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.