Correlation Between Edwards Lifesciences and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Edwards Lifesciences and Johnson Johnson 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 Edwards Lifesciences and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edwards Lifesciences Corp and Johnson Johnson, you can compare the effects of market volatilities on Edwards Lifesciences and Johnson Johnson 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 Edwards Lifesciences with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edwards Lifesciences and Johnson Johnson.
Diversification Opportunities for Edwards Lifesciences and Johnson Johnson
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Edwards and Johnson is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Edwards Lifesciences 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 Edwards Lifesciences Corp are associated (or correlated) with Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Johnson Johnson go up and down completely randomly.
Pair Corralation between Edwards Lifesciences and Johnson Johnson
Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to generate 2.61 times more return on investment than Johnson Johnson. However, Edwards Lifesciences is 2.61 times more volatile than Johnson Johnson. It trades about 0.24 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.12 per unit of risk. If you would invest 8,651 in Edwards Lifesciences Corp on December 29, 2023 and sell it today you would earn a total of 864.00 from holding Edwards Lifesciences Corp or generate 9.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Edwards Lifesciences Corp vs. Johnson Johnson
Performance |
Timeline |
Edwards Lifesciences Corp |
Johnson Johnson |
Edwards Lifesciences and Johnson Johnson Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Edwards Lifesciences and Johnson Johnson
The main advantage of trading using opposite Edwards Lifesciences and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, Johnson Johnson 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 Johnson Johnson will offset losses from the drop in Johnson Johnson's long position.Edwards Lifesciences vs. EUDA Health Holdings | Edwards Lifesciences vs. Spectral AI | Edwards Lifesciences vs. Cigna Corp | Edwards Lifesciences vs. Definitive Healthcare Corp |
Johnson Johnson vs. Agilent Technologies | Johnson Johnson vs. Mustang Bio | Johnson Johnson vs. Moleculin Biotech | Johnson Johnson vs. Clever Leaves Holdings |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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