Correlation Between Edwards Lifesciences and CryoLife

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

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

Diversification Opportunities for Edwards Lifesciences and CryoLife

0.79

Correlation Coefficient

Edwards Lifesciences  CryoLife

Poor diversification

The 3 months correlation between Edwards and CryoLife is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences and CryoLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CryoLife 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 CryoLife. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CryoLife has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and CryoLife go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and CryoLife

Assuming the 90 days horizon Edwards Lifesciences is expected to under-perform the CryoLife. In addition to that, Edwards Lifesciences is 1.8 times more volatile than CryoLife. It trades about -0.02 of its total potential returns per unit of risk. CryoLife is currently generating about 0.08 per unit of volatility. If you would invest  2,380  in CryoLife on September 29, 2024 and sell it today you would earn a total of  420.00  from holding CryoLife or generate 17.65% return on investment over 90 days.

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

Edwards Lifesciences  vs.  CryoLife

Edwards Lifesciences

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Edwards Lifesciences reported solid returns over the last few months and may actually be approaching a breakup point.

CryoLife

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CryoLife are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CryoLife reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Edwards Lifesciences and CryoLife

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

The idea behind Edwards Lifesciences and CryoLife 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.