Correlation Between Establishment Labs and Edwards Lifesciences
Can any of the company-specific risk be diversified away by investing in both Establishment Labs 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 Establishment Labs and Edwards Lifesciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Establishment Labs Holdings and Edwards Lifesciences Corp, you can compare the effects of market volatilities on Establishment Labs 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 Establishment Labs with a short position of Edwards Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Establishment Labs and Edwards Lifesciences.
Diversification Opportunities for Establishment Labs and Edwards Lifesciences
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Establishment and Edwards is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Establishment Labs Holdings 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 Establishment Labs 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 Establishment Labs Holdings 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 Establishment Labs i.e., Establishment Labs and Edwards Lifesciences go up and down completely randomly.
Pair Corralation between Establishment Labs and Edwards Lifesciences
Given the investment horizon of 90 days Establishment Labs Holdings is expected to generate 1.91 times more return on investment than Edwards Lifesciences. However, Establishment Labs is 1.91 times more volatile than Edwards Lifesciences Corp. It trades about 0.01 of its potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about 0.0 per unit of risk. If you would invest 6,178 in Establishment Labs Holdings on January 26, 2024 and sell it today you would lose (1,283) from holding Establishment Labs Holdings or give up 20.77% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Establishment Labs Holdings vs. Edwards Lifesciences Corp
Performance |
Timeline |
Establishment Labs |
Edwards Lifesciences Corp |
Establishment Labs and Edwards Lifesciences Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Establishment Labs and Edwards Lifesciences
The main advantage of trading using opposite Establishment Labs and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Establishment Labs 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.Establishment Labs vs. Orthopediatrics Corp | Establishment Labs vs. Integer Holdings Corp | Establishment Labs vs. Treace Medical Concepts | Establishment Labs vs. CONMED |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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