Correlation Between Boston Scientific and Edwards Lifesciences

Can any of the company-specific risk be diversified away by investing in both Boston Scientific 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 Boston Scientific and Edwards Lifesciences into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boston Scientific Corp and Edwards Lifesciences Corp, you can compare the effects of market volatilities on Boston Scientific 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 Boston Scientific with a short position of Edwards Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Scientific and Edwards Lifesciences.

Diversification Opportunities for Boston Scientific and Edwards Lifesciences

0.36

Correlation Coefficient

Boston Scientific  Edwards Lifesciences

Weak diversification

The 3 months correlation between Boston and Edwards is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Boston Scientific 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 Boston Scientific 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 Boston Scientific 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 Boston Scientific i.e., Boston Scientific and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between Boston Scientific and Edwards Lifesciences

Considering the 90-day investment horizon Boston Scientific is expected to generate 1.13 times less return on investment than Edwards Lifesciences. But when comparing it to its historical volatility, Boston Scientific Corp is 1.41 times less risky than Edwards Lifesciences. It trades about 0.17 of its potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6,599  in Edwards Lifesciences Corp on August 30, 2024 and sell it today you would earn a total of  608.00  from holding Edwards Lifesciences Corp or generate 9.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Boston Scientific Corp  vs.  Edwards Lifesciences Corp

Boston Scientific Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Boston Scientific may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Edwards Lifesciences Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Edwards Lifesciences is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Boston Scientific and Edwards Lifesciences

The main advantage of trading using opposite Boston Scientific and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Scientific 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 Boston Scientific 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.