Correlation Between Information Services and Edwards Lifesciences

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

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

Diversification Opportunities for Information Services and Edwards Lifesciences

0.81

Correlation Coefficient

Information Services  Edwards Lifesciences

Very poor diversification

The 3 months correlation between Information and Edwards is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Information Services Internati and Edwards Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences and Information Services 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 Information Services International Dentsu 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 has no effect on the direction of Information Services i.e., Information Services and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between Information Services and Edwards Lifesciences

Assuming the 90 days horizon Information Services International Dentsu is expected to generate 1.28 times more return on investment than Edwards Lifesciences. However, Information Services is 1.28 times more volatile than Edwards Lifesciences. It trades about 0.07 of its potential returns per unit of risk. Edwards Lifesciences is currently generating about 0.04 per unit of risk. If you would invest  3,160  in Information Services International Dentsu on October 24, 2024 and sell it today you would earn a total of  240.00  from holding Information Services International Dentsu or generate 7.59% return on investment over 90 days.

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

Information Services Internati  vs.  Edwards Lifesciences

Information Services

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services International Dentsu are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Information Services may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Edwards Lifesciences

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Edwards Lifesciences is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Information Services and Edwards Lifesciences

The main advantage of trading using opposite Information Services and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Services 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 Information Services International Dentsu and Edwards Lifesciences 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.