Correlation Between Edwards Lifesciences and ICU Medical

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

Diversification Opportunities for Edwards Lifesciences and ICU Medical

-0.35

Correlation Coefficient

Edwards Lifesciences  ICU Medical

Very good diversification

The 3 months correlation between Edwards and ICU is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and ICU Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICU Medical 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 ICU Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICU Medical has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and ICU Medical go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and ICU Medical

Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to generate 0.9 times more return on investment than ICU Medical. However, Edwards Lifesciences Corp is 1.11 times less risky than ICU Medical. It trades about 0.04 of its potential returns per unit of risk. ICU Medical is currently generating about 0.01 per unit of risk. If you would invest  6,875  in Edwards Lifesciences Corp on September 3, 2024 and sell it today you would earn a total of  260.00  from holding Edwards Lifesciences Corp or generate 3.78% return on investment over 90 days.

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

Edwards Lifesciences Corp  vs.  ICU Medical

Edwards Lifesciences Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Edwards Lifesciences is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ICU Medical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICU Medical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, ICU Medical is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Edwards Lifesciences and ICU Medical

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

The idea behind Edwards Lifesciences Corp and ICU Medical 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.