Correlation Between Edwards Lifesciences and Veeva Systems

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

Diversification Opportunities for Edwards Lifesciences and Veeva Systems

-0.27

Correlation Coefficient

Edwards Lifesciences  Veeva Systems

Very good diversification

The 3 months correlation between Edwards and Veeva is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and Veeva Systems Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veeva Systems Class 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 Veeva Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veeva Systems Class has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and Veeva Systems go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and Veeva Systems

Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to under-perform the Veeva Systems. But the stock apears to be less risky and, when comparing its historical volatility, Edwards Lifesciences Corp is 1.17 times less risky than Veeva Systems. The stock trades about -0.04 of its potential returns per unit of risk. The Veeva Systems Class is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  21,147  in Veeva Systems Class on December 28, 2024 and sell it today you would earn a total of  2,601  from holding Veeva Systems Class or generate 12.3% 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.  Veeva Systems Class

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.

Veeva Systems Class

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Veeva Systems Class are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Veeva Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Edwards Lifesciences and Veeva Systems

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

The idea behind Edwards Lifesciences Corp and Veeva Systems Class 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.