Correlation Between Bone Biologics and Edwards Lifesciences

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

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

Diversification Opportunities for Bone Biologics and Edwards Lifesciences

-0.27

Correlation Coefficient

Bone Biologics  Edwards Lifesciences

Very good diversification

The 3 months correlation between Bone and Edwards is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bone Biologics Corp 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 Bone Biologics 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 Bone Biologics Corp 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 Bone Biologics i.e., Bone Biologics and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between Bone Biologics and Edwards Lifesciences

Given the investment horizon of 90 days Bone Biologics Corp is expected to generate 3.92 times more return on investment than Edwards Lifesciences. However, Bone Biologics is 3.92 times more volatile than Edwards Lifesciences Corp. It trades about 0.05 of its potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about -0.25 per unit of risk. If you would invest  179.00  in Bone Biologics Corp on February 4, 2024 and sell it today you would earn a total of  6.00  from holding Bone Biologics Corp or generate 3.35% return on investment over 90 days.

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

Bone Biologics Corp  vs.  Edwards Lifesciences Corp

Bone Biologics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bone Biologics Corp 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 essential 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.

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.

Pair Trading with Bone Biologics and Edwards Lifesciences

The main advantage of trading using opposite Bone Biologics and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bone Biologics 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 Bone Biologics Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.