Correlation Between CAREER EDUCATION and Edwards Lifesciences

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

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

Diversification Opportunities for CAREER EDUCATION and Edwards Lifesciences

0.51

Correlation Coefficient

CAREER EDUCATION  Edwards Lifesciences

Very weak diversification

The 3 months correlation between CAREER and Edwards is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding CAREER EDUCATION and Edwards Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences and CAREER EDUCATION 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 CAREER EDUCATION 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 CAREER EDUCATION i.e., CAREER EDUCATION and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between CAREER EDUCATION and Edwards Lifesciences

Assuming the 90 days trading horizon CAREER EDUCATION is expected to generate 0.95 times more return on investment than Edwards Lifesciences. However, CAREER EDUCATION is 1.05 times less risky than Edwards Lifesciences. It trades about -0.09 of its potential returns per unit of risk. Edwards Lifesciences is currently generating about -0.09 per unit of risk. If you would invest  2,488  in CAREER EDUCATION on December 22, 2024 and sell it today you would lose (228.00) from holding CAREER EDUCATION or give up 9.16% of portfolio value over 90 days.

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

CAREER EDUCATION  vs.  Edwards Lifesciences

CAREER EDUCATION

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAREER EDUCATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Edwards Lifesciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edwards Lifesciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CAREER EDUCATION and Edwards Lifesciences

The main advantage of trading using opposite CAREER EDUCATION and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAREER EDUCATION 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 CAREER EDUCATION 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..