Correlation Between Edwards Lifesciences and Enzo Biochem

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

Diversification Opportunities for Edwards Lifesciences and Enzo Biochem

-0.55

Correlation Coefficient

Edwards Lifesciences  Enzo Biochem

Excellent diversification

The 3 months correlation between Edwards and Enzo is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Enzo Biochem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enzo Biochem 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 Enzo Biochem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enzo Biochem has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Enzo Biochem go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and Enzo Biochem

Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to generate 0.97 times more return on investment than Enzo Biochem. However, Edwards Lifesciences Corp is 1.03 times less risky than Enzo Biochem. It trades about -0.02 of its potential returns per unit of risk. Enzo Biochem is currently generating about -0.06 per unit of risk. If you would invest  9,025  in Edwards Lifesciences Corp on September 29, 2024 and sell it today you would lose (1,433) from holding Edwards Lifesciences Corp or give up 15.88% of portfolio value over 90 days.

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

Edwards Lifesciences Corp  vs.  Enzo Biochem

Edwards Lifesciences Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Edwards Lifesciences showed solid returns over the last few months and may actually be approaching a breakup point.

Enzo Biochem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enzo Biochem has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Edwards Lifesciences and Enzo Biochem

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

The idea behind Edwards Lifesciences Corp and Enzo Biochem 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.