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 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

0.76

Correlation Coefficient

Edwards Lifesciences  Insulet

Poor diversification

The 3 months correlation between Edwards and Insulet is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences 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 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

Assuming the 90 days horizon Edwards Lifesciences is expected to generate 1.71 times less return on investment than Insulet. In addition to that, Edwards Lifesciences is 1.15 times more volatile than Insulet. It trades about 0.04 of its total potential returns per unit of risk. Insulet is currently generating about 0.07 per unit of volatility. If you would invest  16,885  in Insulet on September 23, 2024 and sell it today you would earn a total of  7,615  from holding Insulet or generate 45.1% 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.  Insulet

Edwards Lifesciences

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences are ranked lower than 11 (%) 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.

Insulet

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Insulet are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Insulet reported solid returns over the last few months and may actually be approaching a breakup point.

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 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 Stocks Directory module to find actively traded stocks across global markets.