Correlation Between Vanguard Health and Edwards Lifesciences
Can any of the company-specific risk be diversified away by investing in both Vanguard Health 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 Vanguard Health and Edwards Lifesciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Health Care and Edwards Lifesciences Corp, you can compare the effects of market volatilities on Vanguard Health 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 Vanguard Health with a short position of Edwards Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and Edwards Lifesciences.
Diversification Opportunities for Vanguard Health and Edwards Lifesciences
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Edwards is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care 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 Vanguard Health 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 Vanguard Health Care 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 Vanguard Health i.e., Vanguard Health and Edwards Lifesciences go up and down completely randomly.
Pair Corralation between Vanguard Health and Edwards Lifesciences
Assuming the 90 days horizon Vanguard Health Care is expected to generate 0.62 times more return on investment than Edwards Lifesciences. However, Vanguard Health Care is 1.62 times less risky than Edwards Lifesciences. It trades about -0.12 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 8,872 in Vanguard Health Care on January 25, 2024 and sell it today you would lose (196.00) from holding Vanguard Health Care or give up 2.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Health Care vs. Edwards Lifesciences Corp
Performance |
| Timeline |
| Vanguard Health Care |
| Edwards Lifesciences Corp |
Vanguard Health and Edwards Lifesciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Health and Edwards Lifesciences
The main advantage of trading using opposite Vanguard Health and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health 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.| Vanguard Health vs. Vanguard Health Care | Vanguard Health vs. T Rowe Price | Vanguard Health vs. Blackrock Health Sciences | Vanguard Health vs. Blackrock Health Sciences |
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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