Correlation Between Edwards Lifesciences and Medtronic PLC
Can any of the company-specific risk be diversified away by investing in both Edwards Lifesciences and Medtronic PLC 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 Medtronic PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edwards Lifesciences and Medtronic PLC, you can compare the effects of market volatilities on Edwards Lifesciences and Medtronic PLC 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 Medtronic PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edwards Lifesciences and Medtronic PLC.
Diversification Opportunities for Edwards Lifesciences and Medtronic PLC
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Edwards and Medtronic is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic PLC 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 are associated (or correlated) with Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Medtronic PLC go up and down completely randomly.
Pair Corralation between Edwards Lifesciences and Medtronic PLC
Assuming the 90 days horizon Edwards Lifesciences is expected to generate 1.22 times more return on investment than Medtronic PLC. However, Edwards Lifesciences is 1.22 times more volatile than Medtronic PLC. It trades about 0.17 of its potential returns per unit of risk. Medtronic PLC is currently generating about -0.01 per unit of risk. If you would invest 6,530 in Edwards Lifesciences on November 27, 2024 and sell it today you would earn a total of 460.00 from holding Edwards Lifesciences or generate 7.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edwards Lifesciences vs. Medtronic PLC
Performance |
| Timeline |
| Edwards Lifesciences |
| Medtronic PLC |
Edwards Lifesciences and Medtronic PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edwards Lifesciences and Medtronic PLC
The main advantage of trading using opposite Edwards Lifesciences and Medtronic PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, Medtronic PLC 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 Medtronic PLC will offset losses from the drop in Medtronic PLC's long position.| Edwards Lifesciences vs. GRUPO CARSO A1 | Edwards Lifesciences vs. Direct Line Insurance | Edwards Lifesciences vs. CREDIT AGRICOLE | Edwards Lifesciences vs. Chiba Bank |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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