Correlation Between Encision and Edwards Lifesciences

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

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

Diversification Opportunities for Encision and Edwards Lifesciences

0.19

Correlation Coefficient

Encision  Edwards Lifesciences

Average diversification

The 3 months correlation between Encision and Edwards is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Encision 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 Encision 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 Encision 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 Encision i.e., Encision and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between Encision and Edwards Lifesciences

Given the investment horizon of 90 days Encision is expected to generate 19.87 times less return on investment than Edwards Lifesciences. But when comparing it to its historical volatility, Encision is 1.08 times less risky than Edwards Lifesciences. It trades about 0.01 of its potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7,324  in Edwards Lifesciences Corp on January 26, 2024 and sell it today you would earn a total of  1,537  from holding Edwards Lifesciences Corp or generate 20.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	19.35%
Values	Daily Returns

Encision  vs.  Edwards Lifesciences Corp

Encision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Encision has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Encision is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 unfluctuating basic indicators, Edwards Lifesciences showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Encision and Edwards Lifesciences

The main advantage of trading using opposite Encision and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encision 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 Encision 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 CEOs Directory module to screen CEOs from public companies around the world.