Correlation Between Edwards Lifesciences and Target
Can any of the company-specific risk be diversified away by investing in both Edwards Lifesciences and Target 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 Target 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 Target, you can compare the effects of market volatilities on Edwards Lifesciences and Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edwards Lifesciences and Target.
Diversification Opportunities for Edwards Lifesciences and Target
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Edwards and Target is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Target go up and down completely randomly.
Pair Corralation between Edwards Lifesciences and Target
Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to generate 1.01 times more return on investment than Target. However, Edwards Lifesciences is 1.01 times more volatile than Target. It trades about 0.16 of its potential returns per unit of risk. Target is currently generating about 0.13 per unit of risk. If you would invest 7,324 in Edwards Lifesciences Corp on January 26, 2024 and sell it today you would earn a total of 1,537 from holding Edwards Lifesciences Corp or generate 20.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Edwards Lifesciences Corp vs. Target
Performance |
Timeline |
Edwards Lifesciences Corp |
Target |
Edwards Lifesciences and Target Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Edwards Lifesciences and Target
The main advantage of trading using opposite Edwards Lifesciences and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.Edwards Lifesciences vs. Orthopediatrics Corp | Edwards Lifesciences vs. Varex Imaging Corp | Edwards Lifesciences vs. Sight Sciences | Edwards Lifesciences vs. Iradimed Co |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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