Correlation Between NVIDIA and Edwards Lifesciences

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

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

Diversification Opportunities for NVIDIA and Edwards Lifesciences

-0.36

Correlation Coefficient

NVIDIA  Edwards Lifesciences

Very good diversification

The 3 months correlation between NVIDIA and Edwards is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Edwards Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences and NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between NVIDIA and Edwards Lifesciences

Given the investment horizon of 90 days NVIDIA is expected to generate 1.02 times more return on investment than Edwards Lifesciences. However, NVIDIA is 1.02 times more volatile than Edwards Lifesciences. It trades about 0.04 of its potential returns per unit of risk. Edwards Lifesciences is currently generating about -0.02 per unit of risk. If you would invest  12,352  in NVIDIA on October 20, 2024 and sell it today you would earn a total of  1,419  from holding NVIDIA or generate 11.49% return on investment over 90 days.

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

NVIDIA  vs.  Edwards Lifesciences

NVIDIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, NVIDIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Edwards Lifesciences

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Edwards Lifesciences may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NVIDIA and Edwards Lifesciences

The main advantage of trading using opposite NVIDIA and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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 NVIDIA 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.