Correlation Between Insulet and Edwards Lifesciences

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

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

Diversification Opportunities for Insulet and Edwards Lifesciences

0.29

Correlation Coefficient

Insulet  Edwards Lifesciences

Modest diversification

The 3 months correlation between Insulet and Edwards is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Insulet 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 Insulet 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 Insulet 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 Insulet i.e., Insulet and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between Insulet and Edwards Lifesciences

Given the investment horizon of 90 days Insulet is expected to generate 1.22 times more return on investment than Edwards Lifesciences. However, Insulet is 1.22 times more volatile than Edwards Lifesciences Corp. It trades about 0.0 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  26,336  in Insulet on December 29, 2024 and sell it today you would lose (309.00) from holding Insulet or give up 1.17% of portfolio value over 90 days.

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

Insulet  vs.  Edwards Lifesciences Corp

Insulet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insulet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Insulet is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Insulet and Edwards Lifesciences

The main advantage of trading using opposite Insulet and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insulet 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 Insulet 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.