Correlation Between Varex Imaging and Edwards Lifesciences
Can any of the company-specific risk be diversified away by investing in both Varex Imaging and Edwards Lifesciences 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 Varex Imaging and Edwards Lifesciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Varex Imaging Corp and Edwards Lifesciences Corp, you can compare the effects of market volatilities on Varex Imaging and Edwards Lifesciences 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 Varex Imaging with a short position of Edwards Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Varex Imaging and Edwards Lifesciences.
Diversification Opportunities for Varex Imaging and Edwards Lifesciences
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Varex and Edwards is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Varex Imaging Corp and Edwards Lifesciences Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences Corp and Varex Imaging 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 Varex Imaging Corp are associated (or correlated) with Edwards Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edwards Lifesciences Corp has no effect on the direction of Varex Imaging i.e., Varex Imaging and Edwards Lifesciences go up and down completely randomly.
Pair Corralation between Varex Imaging and Edwards Lifesciences
Given the investment horizon of 90 days Varex Imaging Corp is expected to under-perform the Edwards Lifesciences. In addition to that, Varex Imaging is 1.05 times more volatile than Edwards Lifesciences Corp. It trades about -0.01 of its total potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about 0.01 per unit of volatility. 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 |
Varex Imaging Corp vs. Edwards Lifesciences Corp
Performance |
| Timeline |
| Varex Imaging Corp |
| Edwards Lifesciences Corp |
Varex Imaging and Edwards Lifesciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Varex Imaging and Edwards Lifesciences
The main advantage of trading using opposite Varex Imaging and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varex Imaging position performs unexpectedly, Edwards Lifesciences 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 Edwards Lifesciences will offset losses from the drop in Edwards Lifesciences' long position.The idea behind Varex Imaging Corp and Edwards Lifesciences Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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