Correlation Between Edwards Lifesciences and Smith Nephew
Can any of the company-specific risk be diversified away by investing in both Edwards Lifesciences and Smith Nephew 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 Smith Nephew 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 Smith Nephew SNATS, you can compare the effects of market volatilities on Edwards Lifesciences and Smith Nephew 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 Smith Nephew. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edwards Lifesciences and Smith Nephew.
Diversification Opportunities for Edwards Lifesciences and Smith Nephew
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Edwards and Smith is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Smith Nephew SNATS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew SNATS 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 Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew SNATS has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Smith Nephew go up and down completely randomly.
Pair Corralation between Edwards Lifesciences and Smith Nephew
Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to generate 0.43 times more return on investment than Smith Nephew. However, Edwards Lifesciences Corp is 2.35 times less risky than Smith Nephew. It trades about 0.15 of its potential returns per unit of risk. Smith Nephew SNATS is currently generating about -0.19 per unit of risk. If you would invest 6,852 in Edwards Lifesciences Corp on August 28, 2024 and sell it today you would earn a total of 275.00 from holding Edwards Lifesciences Corp or generate 4.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edwards Lifesciences Corp vs. Smith Nephew SNATS
Performance |
| Timeline |
| Edwards Lifesciences Corp |
| Smith Nephew SNATS |
Edwards Lifesciences and Smith Nephew Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edwards Lifesciences and Smith Nephew
The main advantage of trading using opposite Edwards Lifesciences and Smith Nephew positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, Smith Nephew 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 Smith Nephew will offset losses from the drop in Smith Nephew'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 |
| Smith Nephew vs. CochLear Ltd ADR | Smith Nephew vs. Integer Holdings Corp | Smith Nephew vs. Orthofix Medical | Smith Nephew vs. Glaukos Corp |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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