Correlation Between ABIOMED and Edwards Lifesciences

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

Diversification Opportunities for ABIOMED and Edwards Lifesciences

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between ABIOMED and Edwards is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ABIOMED 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 ABIOMED 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 ABIOMED 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 ABIOMED i.e., ABIOMED and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between ABIOMED and Edwards Lifesciences

If you would invest  8,651  in Edwards Lifesciences Corp on December 29, 2023 and sell it today you would earn a total of  905.00  from holding Edwards Lifesciences Corp or generate 10.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

ABIOMED  vs.  Edwards Lifesciences Corp

 Performance 
       Timeline  
ABIOMED 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days ABIOMED has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, ABIOMED 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

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Edwards Lifesciences showed solid returns over the last few months and may actually be approaching a breakup point.

ABIOMED and Edwards Lifesciences Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ABIOMED and Edwards Lifesciences

The main advantage of trading using opposite ABIOMED and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABIOMED 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 ABIOMED 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.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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