Correlation Between VERISK ANLYTCS and Edwards Lifesciences

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

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

Diversification Opportunities for VERISK ANLYTCS and Edwards Lifesciences

0.72

Correlation Coefficient

VERISK ANLYTCS  Edwards Lifesciences

Poor diversification

The 3 months correlation between VERISK and Edwards is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding VERISK ANLYTCS A and Edwards Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences and VERISK ANLYTCS 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 VERISK ANLYTCS A 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 VERISK ANLYTCS i.e., VERISK ANLYTCS and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between VERISK ANLYTCS and Edwards Lifesciences

Assuming the 90 days trading horizon VERISK ANLYTCS is expected to generate 1.87 times less return on investment than Edwards Lifesciences. But when comparing it to its historical volatility, VERISK ANLYTCS A is 1.75 times less risky than Edwards Lifesciences. It trades about 0.16 of its potential returns per unit of risk. Edwards Lifesciences is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6,000  in Edwards Lifesciences on October 8, 2024 and sell it today you would earn a total of  1,125  from holding Edwards Lifesciences or generate 18.75% return on investment over 90 days.

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

VERISK ANLYTCS A  vs.  Edwards Lifesciences

VERISK ANLYTCS A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VERISK ANLYTCS A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, VERISK ANLYTCS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Edwards Lifesciences

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Edwards Lifesciences reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VERISK ANLYTCS and Edwards Lifesciences

The main advantage of trading using opposite VERISK ANLYTCS and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VERISK ANLYTCS 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 VERISK ANLYTCS A 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.