Correlation Between NYSE Composite and Edwards Lifesciences

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

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

Diversification Opportunities for NYSE Composite and Edwards Lifesciences

-0.26

Correlation Coefficient

NYSE Composite  Edwards Lifesciences

Very good diversification

The 3 months correlation between NYSE and Edwards is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between NYSE Composite and Edwards Lifesciences

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Edwards Lifesciences. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 2.66 times less risky than Edwards Lifesciences. The index trades about -0.04 of its potential returns per unit of risk. The Edwards Lifesciences Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,135  in Edwards Lifesciences Corp on November 29, 2024 and sell it today you would earn a total of  61.00  from holding Edwards Lifesciences Corp or generate 0.85% return on investment over 90 days.

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

NYSE Composite  vs.  Edwards Lifesciences Corp

Pair Trading with NYSE Composite and Edwards Lifesciences

The main advantage of trading using opposite NYSE Composite and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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 NYSE Composite 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.