Correlation Between Edwards Lifesciences and Medtronic PLC

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

Diversification Opportunities for Edwards Lifesciences and Medtronic PLC

-0.57

Correlation Coefficient

Edwards Lifesciences  Medtronic PLC

Excellent diversification

The 3 months correlation between Edwards and Medtronic is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic PLC 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 Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Medtronic PLC go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and Medtronic PLC

Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to under-perform the Medtronic PLC. In addition to that, Edwards Lifesciences is 1.0 times more volatile than Medtronic PLC. It trades about -0.04 of its total potential returns per unit of risk. Medtronic PLC is currently generating about 0.11 per unit of volatility. If you would invest  7,961  in Medtronic PLC on December 29, 2024 and sell it today you would earn a total of  802.00  from holding Medtronic PLC or generate 10.07% return on investment over 90 days.

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

Edwards Lifesciences Corp  vs.  Medtronic PLC

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.

Medtronic PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medtronic PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Medtronic PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Edwards Lifesciences and Medtronic PLC

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

The idea behind Edwards Lifesciences Corp and Medtronic PLC 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.