Correlation Between Abbott Laboratories and Edwards Lifesciences
Can any of the company-specific risk be diversified away by investing in both Abbott Laboratories 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 Abbott Laboratories and Edwards Lifesciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abbott Laboratories and Edwards Lifesciences, you can compare the effects of market volatilities on Abbott Laboratories 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 Abbott Laboratories with a short position of Edwards Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abbott Laboratories and Edwards Lifesciences.
Diversification Opportunities for Abbott Laboratories and Edwards Lifesciences
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Abbott and Edwards is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Abbott Laboratories and Edwards Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences and Abbott Laboratories 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 Abbott Laboratories 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 has no effect on the direction of Abbott Laboratories i.e., Abbott Laboratories and Edwards Lifesciences go up and down completely randomly.
Pair Corralation between Abbott Laboratories and Edwards Lifesciences
Assuming the 90 days trading horizon Abbott Laboratories is expected to generate 0.5 times more return on investment than Edwards Lifesciences. However, Abbott Laboratories is 2.0 times less risky than Edwards Lifesciences. It trades about 0.03 of its potential returns per unit of risk. Edwards Lifesciences is currently generating about 0.01 per unit of risk. If you would invest 9,839 in Abbott Laboratories on September 1, 2024 and sell it today you would earn a total of 1,419 from holding Abbott Laboratories or generate 14.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Abbott Laboratories vs. Edwards Lifesciences
Performance |
| Timeline |
| Abbott Laboratories |
| Edwards Lifesciences |
Abbott Laboratories and Edwards Lifesciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abbott Laboratories and Edwards Lifesciences
The main advantage of trading using opposite Abbott Laboratories and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abbott Laboratories 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.| Abbott Laboratories vs. Stryker | Abbott Laboratories vs. Superior Plus Corp | Abbott Laboratories vs. NMI Holdings | Abbott Laboratories vs. Origin Agritech |
| Edwards Lifesciences vs. SPORT LISBOA E | Edwards Lifesciences vs. Columbia Sportswear | Edwards Lifesciences vs. Air Transport Services | Edwards Lifesciences vs. Mitsubishi Gas Chemical |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |