Correlation Between Pacific Biosciences and Edwards Lifesciences

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

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

Diversification Opportunities for Pacific Biosciences and Edwards Lifesciences

0.05

Correlation Coefficient

Pacific Biosciences  Edwards Lifesciences

Significant diversification

The 3 months correlation between Pacific and Edwards is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Biosciences of 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 Pacific Biosciences 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 Pacific Biosciences of 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 Pacific Biosciences i.e., Pacific Biosciences and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between Pacific Biosciences and Edwards Lifesciences

Given the investment horizon of 90 days Pacific Biosciences of is expected to generate 4.11 times more return on investment than Edwards Lifesciences. However, Pacific Biosciences is 4.11 times more volatile than Edwards Lifesciences Corp. It trades about 0.06 of its potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about 0.11 per unit of risk. If you would invest  174.00  in Pacific Biosciences of on September 23, 2024 and sell it today you would earn a total of  23.00  from holding Pacific Biosciences of or generate 13.22% return on investment over 90 days.

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

Pacific Biosciences of  vs.  Edwards Lifesciences Corp

Pacific Biosciences

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Biosciences of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Pacific Biosciences sustained solid returns over the last few months and may actually be approaching a breakup point.

Edwards Lifesciences Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Edwards Lifesciences may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pacific Biosciences and Edwards Lifesciences

The main advantage of trading using opposite Pacific Biosciences and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Biosciences 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 Pacific Biosciences of 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.