Correlation Between Adapthealth Corp and Edwards Lifesciences

Can any of the company-specific risk be diversified away by investing in both Adapthealth Corp 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 Adapthealth Corp and Edwards Lifesciences into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Adapthealth Corp and Edwards Lifesciences Corp, you can compare the effects of market volatilities on Adapthealth Corp 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 Adapthealth Corp with a short position of Edwards Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adapthealth Corp and Edwards Lifesciences.

Diversification Opportunities for Adapthealth Corp and Edwards Lifesciences

0.8

Correlation Coefficient

Adapthealth Corp  Edwards Lifesciences

Very poor diversification

The 3 months correlation between Adapthealth and Edwards is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Adapthealth Corp 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 Adapthealth Corp 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 Adapthealth Corp 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 Adapthealth Corp i.e., Adapthealth Corp and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between Adapthealth Corp and Edwards Lifesciences

Given the investment horizon of 90 days Adapthealth Corp is expected to under-perform the Edwards Lifesciences. In addition to that, Adapthealth Corp is 1.75 times more volatile than Edwards Lifesciences Corp. It trades about -0.21 of its total potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about -0.29 per unit of volatility. If you would invest  9,431  in Edwards Lifesciences Corp on January 19, 2024 and sell it today you would lose (766.00) from holding Edwards Lifesciences Corp or give up 8.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Adapthealth Corp  vs.  Edwards Lifesciences Corp

Adapthealth Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adapthealth Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Adapthealth Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Edwards Lifesciences Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Edwards Lifesciences showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adapthealth Corp and Edwards Lifesciences

The main advantage of trading using opposite Adapthealth Corp and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adapthealth Corp 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 Adapthealth Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.