Correlation Between Edwards Lifesciences and CVS Health
Can any of the company-specific risk be diversified away by investing in both Edwards Lifesciences and CVS Health 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 CVS Health 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 CVS Health Corp, you can compare the effects of market volatilities on Edwards Lifesciences and CVS Health 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edwards Lifesciences and CVS Health.
Diversification Opportunities for Edwards Lifesciences and CVS Health
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Edwards and CVS is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and CVS Health go up and down completely randomly.
Pair Corralation between Edwards Lifesciences and CVS Health
Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to under-perform the CVS Health. In addition to that, Edwards Lifesciences is 1.43 times more volatile than CVS Health Corp. It trades about -0.03 of its total potential returns per unit of risk. CVS Health Corp is currently generating about 0.05 per unit of volatility. If you would invest 5,245 in CVS Health Corp on August 25, 2024 and sell it today you would earn a total of 556.00 from holding CVS Health Corp or generate 10.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edwards Lifesciences Corp vs. CVS Health Corp
Performance |
| Timeline |
| Edwards Lifesciences Corp |
| CVS Health Corp |
Edwards Lifesciences and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edwards Lifesciences and CVS Health
The main advantage of trading using opposite Edwards Lifesciences and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| Edwards Lifesciences vs. Medtronic PLC | Edwards Lifesciences vs. Abbott Laboratories | Edwards Lifesciences vs. Boston Scientific Corp | Edwards Lifesciences vs. Zimmer Biomet Holdings |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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