Correlation Between Henry Schein and Edwards Lifesciences

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Can any of the company-specific risk be diversified away by investing in both Henry Schein 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 Henry Schein and Edwards Lifesciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Henry Schein and Edwards Lifesciences Corp, you can compare the effects of market volatilities on Henry Schein 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 Henry Schein with a short position of Edwards Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henry Schein and Edwards Lifesciences.

Diversification Opportunities for Henry Schein and Edwards Lifesciences

0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Henry and Edwards is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Henry Schein 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 Henry Schein 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 Henry Schein 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 Henry Schein i.e., Henry Schein and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between Henry Schein and Edwards Lifesciences

Given the investment horizon of 90 days Henry Schein is expected to generate 1.29 times less return on investment than Edwards Lifesciences. But when comparing it to its historical volatility, Henry Schein is 1.4 times less risky than Edwards Lifesciences. It trades about 0.03 of its potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  8,359  in Edwards Lifesciences Corp on December 19, 2023 and sell it today you would earn a total of  926.00  from holding Edwards Lifesciences Corp or generate 11.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Henry Schein  vs.  Edwards Lifesciences Corp

 Performance 
       Timeline  
Henry Schein 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Weak
Over the last 90 days Henry Schein has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Henry Schein is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Edwards Lifesciences Corp 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Edwards Lifesciences showed solid returns over the last few months and may actually be approaching a breakup point.

Henry Schein and Edwards Lifesciences Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Henry Schein and Edwards Lifesciences

The main advantage of trading using opposite Henry Schein and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Henry Schein 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.
The idea behind Henry Schein and Edwards Lifesciences Corp 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.
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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