Correlation Between Edwards Lifesciences and Varex Imaging
Can any of the company-specific risk be diversified away by investing in both Edwards Lifesciences and Varex Imaging 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 Varex Imaging 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 Varex Imaging Corp, you can compare the effects of market volatilities on Edwards Lifesciences and Varex Imaging 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 Varex Imaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edwards Lifesciences and Varex Imaging.
Diversification Opportunities for Edwards Lifesciences and Varex Imaging
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Edwards and Varex is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Varex Imaging Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varex Imaging 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 Varex Imaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varex Imaging Corp has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Varex Imaging go up and down completely randomly.
Pair Corralation between Edwards Lifesciences and Varex Imaging
Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to generate 0.95 times more return on investment than Varex Imaging. However, Edwards Lifesciences Corp is 1.05 times less risky than Varex Imaging. It trades about 0.01 of its potential returns per unit of risk. Varex Imaging Corp is currently generating about -0.01 per unit of risk. If you would invest 7,461 in Edwards Lifesciences Corp on September 20, 2024 and sell it today you would lose (49.00) from holding Edwards Lifesciences Corp or give up 0.66% 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. Varex Imaging Corp
Performance |
| Timeline |
| Edwards Lifesciences Corp |
| Varex Imaging Corp |
Edwards Lifesciences and Varex Imaging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edwards Lifesciences and Varex Imaging
The main advantage of trading using opposite Edwards Lifesciences and Varex Imaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, Varex Imaging 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 Varex Imaging will offset losses from the drop in Varex Imaging'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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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