Correlation Between Edwards Lifesciences and Boston Scientific

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

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

Diversification Opportunities for Edwards Lifesciences and Boston Scientific

0.93

Correlation Coefficient

Edwards Lifesciences  Boston Scientific

Almost no diversification

The 3 months correlation between Edwards and Boston is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences and Boston Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Scientific 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 Boston Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Scientific has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Boston Scientific go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and Boston Scientific

Assuming the 90 days trading horizon Edwards Lifesciences is expected to generate 1.5 times more return on investment than Boston Scientific. However, Edwards Lifesciences is 1.5 times more volatile than Boston Scientific. It trades about 0.22 of its potential returns per unit of risk. Boston Scientific is currently generating about 0.25 per unit of risk. If you would invest  9,081  in Edwards Lifesciences on September 24, 2024 and sell it today you would earn a total of  2,315  from holding Edwards Lifesciences or generate 25.49% return on investment over 90 days.

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

Edwards Lifesciences  vs.  Boston Scientific

Edwards Lifesciences

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Edwards Lifesciences sustained solid returns over the last few months and may actually be approaching a breakup point.

Boston Scientific

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Boston Scientific sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Edwards Lifesciences and Boston Scientific

The main advantage of trading using opposite Edwards Lifesciences and Boston Scientific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, Boston Scientific 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 Boston Scientific will offset losses from the drop in Boston Scientific's long position.

The idea behind Edwards Lifesciences and Boston Scientific 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..