Correlation Between Edwards Lifesciences and PulmonxCorp

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

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

Diversification Opportunities for Edwards Lifesciences and PulmonxCorp

-0.43

Correlation Coefficient

Edwards Lifesciences  PulmonxCorp

Very good diversification

The 3 months correlation between Edwards and PulmonxCorp is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and PulmonxCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PulmonxCorp and Edwards Lifesciences 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 Edwards Lifesciences Corp are associated (or correlated) with PulmonxCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PulmonxCorp has no effect on the direction of Edwards Lifesciences i.e., Edwards Lifesciences and PulmonxCorp go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and PulmonxCorp

Allowing for the 90-day total investment horizon Edwards Lifesciences Corp is expected to under-perform the PulmonxCorp. But the stock apears to be less risky and, when comparing its historical volatility, Edwards Lifesciences Corp is 4.87 times less risky than PulmonxCorp. The stock trades about -0.31 of its potential returns per unit of risk. The PulmonxCorp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  839.00  in PulmonxCorp on February 7, 2024 and sell it today you would earn a total of  89.00  from holding PulmonxCorp or generate 10.61% return on investment over 90 days.

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

Edwards Lifesciences Corp  vs.  PulmonxCorp

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 fairly stable basic indicators, Edwards Lifesciences is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

PulmonxCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PulmonxCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Edwards Lifesciences and PulmonxCorp

The main advantage of trading using opposite Edwards Lifesciences and PulmonxCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences position performs unexpectedly, PulmonxCorp 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 PulmonxCorp will offset losses from the drop in PulmonxCorp's long position.

The idea behind Edwards Lifesciences Corp and PulmonxCorp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.