Correlation Between Edwards Lifesciences and Definitive Healthcare

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

Diversification Opportunities for Edwards Lifesciences and Definitive Healthcare

0.43

Correlation Coefficient

Edwards Lifesciences  Definitive Healthcare

Very weak diversification

The 3 months correlation between Edwards and Definitive is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Definitive Healthcare Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Definitive Healthcare 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 Definitive Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Definitive Healthcare has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Definitive Healthcare go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and Definitive Healthcare

Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to generate 0.27 times more return on investment than Definitive Healthcare. However, Edwards Lifesciences Corp is 3.71 times less risky than Definitive Healthcare. It trades about -0.04 of its potential returns per unit of risk. Definitive Healthcare Corp is currently generating about -0.06 per unit of risk. If you would invest  7,424  in Edwards Lifesciences Corp on December 29, 2024 and sell it today you would lose (305.00) from holding Edwards Lifesciences Corp or give up 4.11% of portfolio value over 90 days.

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

Edwards Lifesciences Corp  vs.  Definitive Healthcare Corp

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.

Definitive Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Definitive Healthcare Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Edwards Lifesciences and Definitive Healthcare

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

The idea behind Edwards Lifesciences Corp and Definitive Healthcare 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.