Correlation Between CARSALESCOM and Edwards Lifesciences

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

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

Diversification Opportunities for CARSALESCOM and Edwards Lifesciences

0.63

Correlation Coefficient

CARSALESCOM  Edwards Lifesciences

Poor diversification

The 3 months correlation between CARSALESCOM and Edwards is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and Edwards Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences and CARSALESCOM 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 CARSALESCOM 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 has no effect on the direction of CARSALESCOM i.e., CARSALESCOM and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between CARSALESCOM and Edwards Lifesciences

Assuming the 90 days trading horizon CARSALESCOM is expected to generate 2.86 times less return on investment than Edwards Lifesciences. But when comparing it to its historical volatility, CARSALESCOM is 1.12 times less risky than Edwards Lifesciences. It trades about 0.05 of its potential returns per unit of risk. Edwards Lifesciences is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  6,150  in Edwards Lifesciences on September 14, 2024 and sell it today you would earn a total of  908.00  from holding Edwards Lifesciences or generate 14.76% return on investment over 90 days.

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

CARSALESCOM  vs.  Edwards Lifesciences

CARSALESCOM

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Edwards Lifesciences

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Edwards Lifesciences reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CARSALESCOM and Edwards Lifesciences

The main advantage of trading using opposite CARSALESCOM and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARSALESCOM 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 CARSALESCOM and Edwards Lifesciences 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.