Correlation Between Edwards Lifesciences and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both Edwards Lifesciences and Cardinal Health 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 Cardinal Health 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 Cardinal Health, you can compare the effects of market volatilities on Edwards Lifesciences and Cardinal Health 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 Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edwards Lifesciences and Cardinal Health.
Diversification Opportunities for Edwards Lifesciences and Cardinal Health
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Edwards and Cardinal is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health 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 Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Cardinal Health go up and down completely randomly.
Pair Corralation between Edwards Lifesciences and Cardinal Health
Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to generate 1.07 times more return on investment than Cardinal Health. However, Edwards Lifesciences is 1.07 times more volatile than Cardinal Health. It trades about 0.11 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.07 per unit of risk. If you would invest 6,736 in Edwards Lifesciences Corp on September 23, 2024 and sell it today you would earn a total of 745.00 from holding Edwards Lifesciences Corp or generate 11.06% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Edwards Lifesciences Corp vs. Cardinal Health
Performance |
Timeline |
Edwards Lifesciences Corp |
Cardinal Health |
Edwards Lifesciences and Cardinal Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Edwards Lifesciences and Cardinal Health
The main advantage of trading using opposite Edwards Lifesciences and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, Cardinal Health 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 Cardinal Health will offset losses from the drop in Cardinal Health's long position.Edwards Lifesciences vs. Medtronic PLC | Edwards Lifesciences vs. Abbott Laboratories | Edwards Lifesciences vs. Boston Scientific Corp | Edwards Lifesciences vs. Zimmer Biomet Holdings |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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