Correlation Between Edwards Lifesciences and Lifeline Biotechnologies

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

Diversification Opportunities for Edwards Lifesciences and Lifeline Biotechnologies

-0.47

Correlation Coefficient

Edwards Lifesciences  Lifeline Biotechnologies

Very good diversification

The 3 months correlation between Edwards and Lifeline is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Lifeline Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeline Biotechnologies 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 Lifeline Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeline Biotechnologies has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Lifeline Biotechnologies go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and Lifeline Biotechnologies

Allowing for the 90-day total investment horizon Edwards Lifesciences is expected to generate 1105.33 times less return on investment than Lifeline Biotechnologies. But when comparing it to its historical volatility, Edwards Lifesciences Corp is 44.84 times less risky than Lifeline Biotechnologies. It trades about 0.01 of its potential returns per unit of risk. Lifeline Biotechnologies is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Lifeline Biotechnologies on October 12, 2024 and sell it today you would earn a total of  0.00  from holding Lifeline Biotechnologies or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	76.36%
Values	Daily Returns

Edwards Lifesciences Corp  vs.  Lifeline Biotechnologies

Edwards Lifesciences Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences Corp are ranked lower than 6 (%) 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 February 2025.

Lifeline Biotechnologies

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lifeline Biotechnologies are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, Lifeline Biotechnologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Edwards Lifesciences and Lifeline Biotechnologies

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

The idea behind Edwards Lifesciences Corp and Lifeline Biotechnologies 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.