Correlation Between Edwards Lifesciences and Abbott Laboratories
Can any of the company-specific risk be diversified away by investing in both Edwards Lifesciences and Abbott Laboratories 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 Abbott Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edwards Lifesciences and Abbott Laboratories, you can compare the effects of market volatilities on Edwards Lifesciences and Abbott Laboratories 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 Abbott Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edwards Lifesciences and Abbott Laboratories.
Diversification Opportunities for Edwards Lifesciences and Abbott Laboratories
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Edwards and Abbott is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories 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 Abbott Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abbott Laboratories has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Abbott Laboratories go up and down completely randomly.
Pair Corralation between Edwards Lifesciences and Abbott Laboratories
Assuming the 90 days horizon Edwards Lifesciences is expected to generate 1.03 times less return on investment than Abbott Laboratories. But when comparing it to its historical volatility, Edwards Lifesciences is 1.08 times less risky than Abbott Laboratories. It trades about 0.25 of its potential returns per unit of risk. Abbott Laboratories is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 10,364 in Abbott Laboratories on September 1, 2024 and sell it today you would earn a total of 894.00 from holding Abbott Laboratories or generate 8.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edwards Lifesciences vs. Abbott Laboratories
Performance |
| Timeline |
| Edwards Lifesciences |
| Abbott Laboratories |
Edwards Lifesciences and Abbott Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edwards Lifesciences and Abbott Laboratories
The main advantage of trading using opposite Edwards Lifesciences and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, Abbott Laboratories 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 Abbott Laboratories will offset losses from the drop in Abbott Laboratories' long position.| Edwards Lifesciences vs. SPORT LISBOA E | Edwards Lifesciences vs. Columbia Sportswear | Edwards Lifesciences vs. Air Transport Services | Edwards Lifesciences vs. Mitsubishi Gas Chemical |
| Abbott Laboratories vs. Singapore Telecommunications Limited | Abbott Laboratories vs. MTI WIRELESS EDGE | Abbott Laboratories vs. Spirent Communications plc | Abbott Laboratories vs. JJ SNACK FOODS |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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