Correlation Between ECGI Holdings and Edwards Lifesciences

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

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

Diversification Opportunities for ECGI Holdings and Edwards Lifesciences

0.13

Correlation Coefficient

ECGI Holdings  Edwards Lifesciences

Average diversification

The 3 months correlation between ECGI and Edwards is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding ECGI 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 ECGI Holdings 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 ECGI 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 ECGI Holdings i.e., ECGI Holdings and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between ECGI Holdings and Edwards Lifesciences

Given the investment horizon of 90 days ECGI Holdings is expected to generate 10.09 times more return on investment than Edwards Lifesciences. However, ECGI Holdings is 10.09 times more volatile than Edwards Lifesciences Corp. It trades about 0.09 of its potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about 0.16 per unit of risk. If you would invest  0.27  in ECGI Holdings on January 17, 2024 and sell it today you would lose (0.02) from holding ECGI Holdings or give up 7.41% of portfolio value over 90 days.

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

ECGI Holdings  vs.  Edwards Lifesciences Corp

ECGI Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ECGI Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, ECGI Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Edwards Lifesciences Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Edwards Lifesciences showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ECGI Holdings and Edwards Lifesciences

The main advantage of trading using opposite ECGI Holdings and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECGI Holdings 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 ECGI Holdings 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.