Correlation Between B of A and Agilent Technologies

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

Diversification Opportunities for B of A and Agilent Technologies

0.74
  Correlation Coefficient

Poor diversification

The 21 months correlation between B of A and Agilent is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bank Of America and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and B of A 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 Bank Of America 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 B of A i.e., B of A and Agilent Technologies go up and down completely randomly.

Pair Corralation between B of A and Agilent Technologies

Considering the 90-day investment horizon Bank Of America is expected to generate 1.08 times more return on investment than Agilent Technologies. However, B of A is 1.08 times more volatile than Agilent Technologies. It trades about 0.05 of its potential returns per unit of risk. Agilent Technologies is currently generating about 0.03 per unit of risk. If you would invest  2,642  in Bank Of America on May 15, 2022 and sell it today you would earn a total of  988.00  from holding Bank Of America or generate 37.4% return on investment over 90 days.
Time Period21 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Bank Of America  vs.  Agilent Technologies

 Performance (%) 
       Timeline  
Bank Of America 
B of A Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bank Of America are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, B of A is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

B of A Price Channel

Agilent Technologies 
Agilent Performance
2 of 100
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 new stock price disturbance, may contribute to short-term losses for the investors.

Agilent Price Channel

B of A and Agilent Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with B of A and Agilent Technologies

The main advantage of trading using opposite B of A and Agilent Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B of A 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 Bank Of America 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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