Correlation Between Alcoa Corp and Agilent Technologies

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

Diversification Opportunities for Alcoa Corp and Agilent Technologies

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between Alcoa and Agilent is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp i.e., Alcoa Corp and Agilent Technologies go up and down completely randomly.

Pair Corralation between Alcoa Corp and Agilent Technologies

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.1 times more return on investment than Agilent Technologies. However, Alcoa Corp is 1.1 times more volatile than Agilent Technologies. It trades about 0.48 of its potential returns per unit of risk. Agilent Technologies is currently generating about 0.29 per unit of risk. If you would invest  4,073  in Alcoa Corp on May 15, 2022 and sell it today you would earn a total of  1,203  from holding Alcoa Corp or generate 29.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Alcoa Corp  vs.  Agilent Technologies

 Performance (%) 
       Timeline  
Alcoa Corp 
Alcoa Performance
0 of 100
Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest sluggish performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Alcoa Price Channel

Agilent Technologies 
Agilent Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat sluggish basic indicators, Agilent Technologies may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Agilent Price Channel

Alcoa Corp and Agilent Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and Agilent Technologies

The main advantage of trading using opposite Alcoa Corp and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp 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 Alcoa Corp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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