Correlation Between Edwards Lifesciences and Zimmer Biomet
Can any of the company-specific risk be diversified away by investing in both Edwards Lifesciences and Zimmer Biomet 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 Zimmer Biomet 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 Zimmer Biomet Holdings, you can compare the effects of market volatilities on Edwards Lifesciences and Zimmer Biomet 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 Zimmer Biomet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edwards Lifesciences and Zimmer Biomet.
Diversification Opportunities for Edwards Lifesciences and Zimmer Biomet
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Edwards and Zimmer is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Zimmer Biomet Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zimmer Biomet Holdings 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 Zimmer Biomet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zimmer Biomet Holdings has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Zimmer Biomet go up and down completely randomly.
Pair Corralation between Edwards Lifesciences and Zimmer Biomet
Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to generate 1.37 times more return on investment than Zimmer Biomet. However, Edwards Lifesciences is 1.37 times more volatile than Zimmer Biomet Holdings. It trades about 0.0 of its potential returns per unit of risk. Zimmer Biomet Holdings is currently generating about -0.05 per unit of risk. If you would invest 9,140 in Edwards Lifesciences Corp on January 18, 2024 and sell it today you would lose (416.00) from holding Edwards Lifesciences Corp or give up 4.55% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Edwards Lifesciences Corp vs. Zimmer Biomet Holdings
Performance |
Timeline |
Edwards Lifesciences Corp |
Zimmer Biomet Holdings |
Edwards Lifesciences and Zimmer Biomet Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Edwards Lifesciences and Zimmer Biomet
The main advantage of trading using opposite Edwards Lifesciences and Zimmer Biomet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, Zimmer Biomet 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 Zimmer Biomet will offset losses from the drop in Zimmer Biomet's long position.Edwards Lifesciences vs. The Ensign Group | Edwards Lifesciences vs. Select Medical Holdings | Edwards Lifesciences vs. Encompass Health Corp | Edwards Lifesciences vs. Enhabit |
Zimmer Biomet vs. The Ensign Group | Zimmer Biomet vs. Select Medical Holdings | Zimmer Biomet vs. Encompass Health Corp | Zimmer Biomet vs. Enhabit |
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 CEOs Directory module to screen CEOs from public companies around the world.
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