Correlation Between Edwards Lifesciences and AmerisourceBergen

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

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

Diversification Opportunities for Edwards Lifesciences and AmerisourceBergen

0.73

Correlation Coefficient

Edwards Lifesciences  AmerisourceBergen

Poor diversification

The 3 months correlation between Edwards and AmerisourceBergen is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and AmerisourceBergen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmerisourceBergen and Edwards Lifesciences 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 Edwards Lifesciences Corp are associated (or correlated) with AmerisourceBergen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmerisourceBergen has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and AmerisourceBergen go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and AmerisourceBergen

Allowing for the 90-day total investment horizon Edwards Lifesciences is expected to generate 4.79 times less return on investment than AmerisourceBergen. In addition to that, Edwards Lifesciences is 1.95 times more volatile than AmerisourceBergen. It trades about 0.01 of its total potential returns per unit of risk. AmerisourceBergen is currently generating about 0.11 per unit of volatility. If you would invest  16,588  in AmerisourceBergen on January 26, 2024 and sell it today you would earn a total of  1,410  from holding AmerisourceBergen or generate 8.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	34.27%
Values	Daily Returns

Edwards Lifesciences Corp  vs.  AmerisourceBergen

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.

AmerisourceBergen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AmerisourceBergen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, AmerisourceBergen is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Edwards Lifesciences and AmerisourceBergen

The main advantage of trading using opposite Edwards Lifesciences and AmerisourceBergen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, AmerisourceBergen 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 AmerisourceBergen will offset losses from the drop in AmerisourceBergen's long position.

The idea behind Edwards Lifesciences Corp and AmerisourceBergen 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.