Correlation Between Amazon and Agilent Technologies

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Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and Agilent Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Agilent Technologies, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of Agilent Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Agilent Technologies.

Diversification Opportunities for Amazon and Agilent Technologies

-0.58
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Amazon and Agilent is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Amazon 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 Amazon 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 Amazon i.e., Amazon and Agilent Technologies go up and down completely randomly.

Pair Corralation between Amazon and Agilent Technologies

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Agilent Technologies. In addition to that, Amazon is 1.35 times more volatile than Agilent Technologies. It trades about -0.03 of its total potential returns per unit of risk. Agilent Technologies is currently generating about 0.04 per unit of volatility. If you would invest  11,500  in Agilent Technologies on August 31, 2022 and sell it today you would earn a total of  3,730  from holding Agilent Technologies or generate 32.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Agilent Technologies

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Agilent Technologies 
Agilent Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Agilent Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Agilent Price Channel

Amazon and Agilent Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Agilent Technologies

The main advantage of trading using opposite Amazon and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.
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The idea behind Amazon 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.
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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