Correlation Between Edwards Lifesciences and Insulet

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

Diversification Opportunities for Edwards Lifesciences and Insulet

0.29

Correlation Coefficient

Edwards Lifesciences  Insulet

Modest diversification

The 3 months correlation between Edwards and Insulet is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Insulet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insulet 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 Insulet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insulet has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Insulet go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and Insulet

Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to under-perform the Insulet. But the stock apears to be less risky and, when comparing its historical volatility, Edwards Lifesciences Corp is 1.22 times less risky than Insulet. The stock trades about -0.04 of its potential returns per unit of risk. The Insulet is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  26,336  in Insulet on December 29, 2024 and sell it today you would lose (309.00) from holding Insulet or give up 1.17% of portfolio value over 90 days.

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

Edwards Lifesciences Corp  vs.  Insulet

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.

Insulet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insulet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Insulet is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Edwards Lifesciences and Insulet

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

The idea behind Edwards Lifesciences Corp and Insulet 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.