Correlation Between Agilent Technologies and DexCom

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

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

Diversification Opportunities for Agilent Technologies and DexCom

0.08

Correlation Coefficient

Agilent Technologies  DexCom

Significant diversification

The 3 months correlation between Agilent and DexCom is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and DexCom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DexCom Inc 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 DexCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DexCom Inc has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and DexCom go up and down completely randomly.

Pair Corralation between Agilent Technologies and DexCom

Assuming the 90 days trading horizon Agilent Technologies is expected to generate 2.02 times less return on investment than DexCom. But when comparing it to its historical volatility, Agilent Technologies is 1.77 times less risky than DexCom. It trades about 0.09 of its potential returns per unit of risk. DexCom Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  802.00  in DexCom Inc on September 3, 2024 and sell it today you would earn a total of  136.00  from holding DexCom Inc or generate 16.96% return on investment over 90 days.

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

Agilent Technologies  vs.  DexCom Inc

Agilent Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Agilent Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DexCom Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, DexCom sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agilent Technologies and DexCom

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

The idea behind Agilent Technologies and DexCom Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.