Correlation Between IRhythm Technologies and Edwards Lifesciences

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

By analyzing existing cross correlation between iRhythm Technologies and Edwards Lifesciences Corp, you can compare the effects of market volatilities on IRhythm Technologies and Edwards Lifesciences 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 IRhythm Technologies with a short position of Edwards Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of IRhythm Technologies and Edwards Lifesciences.

Diversification Opportunities for IRhythm Technologies and Edwards Lifesciences

-0.28

Correlation Coefficient

IRhythm Technologies  Edwards Lifesciences

Very good diversification

The 3 months correlation between IRhythm and Edwards is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding iRhythm Technologies and Edwards Lifesciences Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences Corp and IRhythm Technologies 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 iRhythm Technologies are associated (or correlated) with Edwards Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edwards Lifesciences Corp has no effect on the direction of IRhythm Technologies i.e., IRhythm Technologies and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between IRhythm Technologies and Edwards Lifesciences

Given the investment horizon of 90 days iRhythm Technologies is expected to generate 1.58 times more return on investment than Edwards Lifesciences. However, IRhythm Technologies is 1.58 times more volatile than Edwards Lifesciences Corp. It trades about 0.13 of its potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about -0.04 per unit of risk. If you would invest  8,692  in iRhythm Technologies on December 29, 2024 and sell it today you would earn a total of  1,808  from holding iRhythm Technologies or generate 20.8% return on investment over 90 days.

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

iRhythm Technologies  vs.  Edwards Lifesciences Corp

iRhythm Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iRhythm Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, IRhythm Technologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with IRhythm Technologies and Edwards Lifesciences

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

The idea behind iRhythm Technologies and Edwards Lifesciences Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.