Correlation Between Edwards Lifesciences and Addus HomeCare

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Can any of the company-specific risk be diversified away by investing in both Edwards Lifesciences and Addus HomeCare 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 Addus HomeCare 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 Addus HomeCare, you can compare the effects of market volatilities on Edwards Lifesciences and Addus HomeCare 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 Addus HomeCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edwards Lifesciences and Addus HomeCare.

Diversification Opportunities for Edwards Lifesciences and Addus HomeCare

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between Edwards and Addus is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare 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 Addus HomeCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addus HomeCare has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Addus HomeCare go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and Addus HomeCare

Allowing for the 90-day total investment horizon Edwards Lifesciences is expected to generate 1.13 times less return on investment than Addus HomeCare. In addition to that, Edwards Lifesciences is 1.1 times more volatile than Addus HomeCare. It trades about 0.14 of its total potential returns per unit of risk. Addus HomeCare is currently generating about 0.17 per unit of volatility. If you would invest  12,295  in Addus HomeCare on September 24, 2024 and sell it today you would earn a total of  701.00  from holding Addus HomeCare or generate 5.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Edwards Lifesciences Corp  vs.  Addus HomeCare

 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 may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Addus HomeCare 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Addus HomeCare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Addus HomeCare is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Edwards Lifesciences and Addus HomeCare Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Edwards Lifesciences and Addus HomeCare

The main advantage of trading using opposite Edwards Lifesciences and Addus HomeCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, Addus HomeCare 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 Addus HomeCare will offset losses from the drop in Addus HomeCare's long position.
The idea behind Edwards Lifesciences Corp and Addus HomeCare 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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