Correlation Between Edwards Lifesciences and AALBERTS IND

Can any of the company-specific risk be diversified away by investing in both Edwards Lifesciences and AALBERTS IND 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 AALBERTS IND into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Edwards Lifesciences and AALBERTS IND, you can compare the effects of market volatilities on Edwards Lifesciences and AALBERTS IND 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 AALBERTS IND. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edwards Lifesciences and AALBERTS IND.

Diversification Opportunities for Edwards Lifesciences and AALBERTS IND

0.31

Correlation Coefficient

Edwards Lifesciences  AALBERTS IND

Weak diversification

The 3 months correlation between Edwards and AALBERTS is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences and AALBERTS IND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AALBERTS IND 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 are associated (or correlated) with AALBERTS IND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AALBERTS IND has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and AALBERTS IND go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and AALBERTS IND

Assuming the 90 days horizon Edwards Lifesciences is expected to under-perform the AALBERTS IND. But the stock apears to be less risky and, when comparing its historical volatility, Edwards Lifesciences is 1.51 times less risky than AALBERTS IND. The stock trades about -0.09 of its potential returns per unit of risk. The AALBERTS IND is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,422  in AALBERTS IND on December 24, 2024 and sell it today you would lose (20.00) from holding AALBERTS IND or give up 0.58% 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  vs.  AALBERTS IND

Edwards Lifesciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edwards Lifesciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AALBERTS IND

Risk-Adjusted Performance

Very Weak

Over the last 90 days AALBERTS IND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AALBERTS IND is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Edwards Lifesciences and AALBERTS IND

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

The idea behind Edwards Lifesciences and AALBERTS IND 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.