Correlation Between Agilent Technologies and Catalyst Pharmaceuticals

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

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

Diversification Opportunities for Agilent Technologies and Catalyst Pharmaceuticals

0.82

Correlation Coefficient

Agilent Technologies  Catalyst Pharmaceuticals

Very poor diversification

The 3 months correlation between Agilent and Catalyst is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Agilent Technologies and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals 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 Catalyst Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Pharmaceuticals has no effect on the direction of Agilent Technologies i.e., Agilent Technologies and Catalyst Pharmaceuticals go up and down completely randomly.

Pair Corralation between Agilent Technologies and Catalyst Pharmaceuticals

Taking into account the 90-day investment horizon Agilent Technologies is expected to generate 0.82 times more return on investment than Catalyst Pharmaceuticals. However, Agilent Technologies is 1.22 times less risky than Catalyst Pharmaceuticals. It trades about -0.05 of its potential returns per unit of risk. Catalyst Pharmaceuticals is currently generating about -0.04 per unit of risk. If you would invest  14,446  in Agilent Technologies on February 8, 2024 and sell it today you would lose (319.00) from holding Agilent Technologies or give up 2.21% of portfolio value over 90 days.

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

Agilent Technologies  vs.  Catalyst Pharmaceuticals

Agilent Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agilent Technologies are ranked lower than 5 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Catalyst Pharmaceuticals

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Catalyst Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agilent Technologies and Catalyst Pharmaceuticals

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

The idea behind Agilent Technologies and Catalyst Pharmaceuticals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.