Correlation Between Abbott Laboratories and Edwards Lifesciences
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories 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 Abbott Laboratories and Edwards Lifesciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and Edwards Lifesciences Corp, you can compare the effects of market volatilities on Abbott Laboratories 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 Abbott Laboratories with a short position of Edwards Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and Edwards Lifesciences.
Diversification Opportunities for Abbott Laboratories and Edwards Lifesciences
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Abbott and Edwards is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories 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 Abbott Laboratories 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 Abbott Laboratories 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 Abbott Laboratories i.e., Abbott Laboratories and Edwards Lifesciences go up and down completely randomly.
Pair Corralation between Abbott Laboratories and Edwards Lifesciences
Considering the 90-day investment horizon Abbott Laboratories is expected to under-perform the Edwards Lifesciences. But the stock apears to be less risky and, when comparing its historical volatility, Abbott Laboratories is 1.38 times less risky than Edwards Lifesciences. The stock trades about -0.15 of its potential returns per unit of risk. The Edwards Lifesciences Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 8,690 in Edwards Lifesciences Corp on January 20, 2024 and sell it today you would lose (45.00) from holding Edwards Lifesciences Corp or give up 0.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Abbott Laboratories vs. Edwards Lifesciences Corp
Performance |
| Timeline |
| Abbott Laboratories |
| Edwards Lifesciences Corp |
Abbott Laboratories and Edwards Lifesciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abbott Laboratories and Edwards Lifesciences
The main advantage of trading using opposite Abbott Laboratories and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories 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.| Abbott Laboratories vs. Agilent Technologies | Abbott Laboratories vs. Illumina | Abbott Laboratories vs. Waters | Abbott Laboratories vs. Thermo Fisher Scientific |
| Edwards Lifesciences vs. Agilent Technologies | Edwards Lifesciences vs. Illumina | Edwards Lifesciences vs. Waters | Edwards Lifesciences vs. Thermo Fisher Scientific |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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