Correlation Between Edwards Lifesciences and American Shared

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Can any of the company-specific risk be diversified away by investing in both Edwards Lifesciences and American Shared 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 American Shared into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edwards Lifesciences Corp and American Shared Hospital, you can compare the effects of market volatilities on Edwards Lifesciences and American Shared 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 American Shared. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edwards Lifesciences and American Shared.

Diversification Opportunities for Edwards Lifesciences and American Shared

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Edwards and American is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and American Shared Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shared Hospital 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 Corp are associated (or correlated) with American Shared. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shared Hospital has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and American Shared go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and American Shared

Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to generate 0.6 times more return on investment than American Shared. However, Edwards Lifesciences Corp is 1.65 times less risky than American Shared. It trades about 0.12 of its potential returns per unit of risk. American Shared Hospital is currently generating about 0.07 per unit of risk. If you would invest  6,633  in Edwards Lifesciences Corp on September 24, 2024 and sell it today you would earn a total of  848.00  from holding Edwards Lifesciences Corp or generate 12.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Edwards Lifesciences Corp  vs.  American Shared Hospital

 Performance 
       Timeline  
Edwards Lifesciences Corp 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Edwards Lifesciences showed solid returns over the last few months and may actually be approaching a breakup point.
American Shared Hospital 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in American Shared Hospital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, American Shared may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Edwards Lifesciences and American Shared Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Edwards Lifesciences and American Shared

The main advantage of trading using opposite Edwards Lifesciences and American Shared positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, American Shared 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 American Shared will offset losses from the drop in American Shared's long position.
The idea behind Edwards Lifesciences Corp and American Shared Hospital 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.
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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