Correlation Between Heico and Edwards Lifesciences
Can any of the company-specific risk be diversified away by investing in both Heico and Edwards Lifesciences 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 Heico and Edwards Lifesciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heico and Edwards Lifesciences Corp, you can compare the effects of market volatilities on Heico and Edwards Lifesciences 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 Heico with a short position of Edwards Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heico and Edwards Lifesciences.
Diversification Opportunities for Heico and Edwards Lifesciences
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Heico and Edwards is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Heico and Edwards Lifesciences Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences Corp and Heico 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 Heico are associated (or correlated) with Edwards Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edwards Lifesciences Corp has no effect on the direction of Heico i.e., Heico and Edwards Lifesciences go up and down completely randomly.
Pair Corralation between Heico and Edwards Lifesciences
Considering the 90-day investment horizon Heico is expected to generate 0.93 times more return on investment than Edwards Lifesciences. However, Heico is 1.07 times less risky than Edwards Lifesciences. It trades about 0.28 of its potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about -0.17 per unit of risk. If you would invest 19,043 in Heico on January 25, 2024 and sell it today you would earn a total of 1,439 from holding Heico or generate 7.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Heico vs. Edwards Lifesciences Corp
Performance |
| Timeline |
| Heico |
| Edwards Lifesciences Corp |
Heico and Edwards Lifesciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heico and Edwards Lifesciences
The main advantage of trading using opposite Heico and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heico position performs unexpectedly, Edwards Lifesciences 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 Edwards Lifesciences will offset losses from the drop in Edwards Lifesciences' long position.| Heico vs. HEICO | Heico vs. L3Harris Technologies | Heico vs. Huntington Ingalls Industries | Heico vs. Lockheed Martin |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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