Correlation Between Edwards Lifesciences and Butterfly Network

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

Diversification Opportunities for Edwards Lifesciences and Butterfly Network

0.37

Correlation Coefficient

Edwards Lifesciences  Butterfly Network

Weak diversification

The 3 months correlation between Edwards and Butterfly is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Butterfly Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Butterfly Network 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 Butterfly Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Butterfly Network has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Butterfly Network go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and Butterfly Network

Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to under-perform the Butterfly Network. But the stock apears to be less risky and, when comparing its historical volatility, Edwards Lifesciences Corp is 4.46 times less risky than Butterfly Network. The stock trades about -0.05 of its potential returns per unit of risk. The Butterfly Network is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  302.00  in Butterfly Network on December 23, 2024 and sell it today you would lose (38.00) from holding Butterfly Network or give up 12.58% of portfolio value over 90 days.

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

Edwards Lifesciences Corp  vs.  Butterfly Network

Edwards Lifesciences Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edwards Lifesciences Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Edwards Lifesciences is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Butterfly Network

Risk-Adjusted Performance

Very Weak

Over the last 90 days Butterfly Network has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Butterfly Network is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Edwards Lifesciences and Butterfly Network

The main advantage of trading using opposite Edwards Lifesciences and Butterfly Network positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, Butterfly Network 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 Butterfly Network will offset losses from the drop in Butterfly Network's long position.

The idea behind Edwards Lifesciences Corp and Butterfly Network 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.