Correlation Between Edwards Lifesciences and Outset Medical

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

Diversification Opportunities for Edwards Lifesciences and Outset Medical

0.68

Correlation Coefficient

Edwards Lifesciences  Outset Medical

Poor diversification

The 3 months correlation between Edwards and Outset is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Outset Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outset 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 Outset Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outset Medical has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Outset Medical go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and Outset Medical

Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to generate 0.2 times more return on investment than Outset Medical. However, Edwards Lifesciences Corp is 4.9 times less risky than Outset Medical. It trades about -0.06 of its potential returns per unit of risk. Outset Medical is currently generating about -0.05 per unit of risk. If you would invest  7,565  in Edwards Lifesciences Corp on December 27, 2024 and sell it today you would lose (456.00) from holding Edwards Lifesciences Corp or give up 6.03% of portfolio value over 90 days.

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

Edwards Lifesciences Corp  vs.  Outset Medical

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.

Outset Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Outset Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Edwards Lifesciences and Outset Medical

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

The idea behind Edwards Lifesciences Corp and Outset 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.