Correlation Between Bio Rad and Edwards Lifesciences

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

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

Diversification Opportunities for Bio Rad and Edwards Lifesciences

0.91

Correlation Coefficient

Bio Rad  Edwards Lifesciences

Almost no diversification

The 3 months correlation between Bio and Edwards is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bio Rad Laboratories 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 Bio Rad 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 Bio Rad Laboratories 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 Bio Rad i.e., Bio Rad and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between Bio Rad and Edwards Lifesciences

Considering the 90-day investment horizon Bio Rad Laboratories is expected to under-perform the Edwards Lifesciences. In addition to that, Bio Rad is 1.42 times more volatile than Edwards Lifesciences Corp. It trades about -0.13 of its total potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about -0.08 per unit of volatility. If you would invest  9,293  in Edwards Lifesciences Corp on March 13, 2024 and sell it today you would lose (679.00) from holding Edwards Lifesciences Corp or give up 7.31% of portfolio value over 90 days.

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

Bio Rad Laboratories  vs.  Edwards Lifesciences Corp

Bio Rad Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bio Rad Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Edwards Lifesciences Corp

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Bio Rad and Edwards Lifesciences

The main advantage of trading using opposite Bio Rad and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bio Rad 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 Bio Rad Laboratories 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.