Correlation Between Orthofix Medical and TransMedics

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

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

Diversification Opportunities for Orthofix Medical and TransMedics

-0.8

Correlation Coefficient

Orthofix Medical  TransMedics

Pay attention - limited upside

The 3 months correlation between Orthofix and TransMedics is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Orthofix Medical and TransMedics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransMedics Group and Orthofix Medical 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 Orthofix Medical are associated (or correlated) with TransMedics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransMedics Group has no effect on the direction of Orthofix Medical i.e., Orthofix Medical and TransMedics go up and down completely randomly.

Pair Corralation between Orthofix Medical and TransMedics

Given the investment horizon of 90 days Orthofix Medical is expected to generate 0.29 times more return on investment than TransMedics. However, Orthofix Medical is 3.49 times less risky than TransMedics. It trades about -0.27 of its potential returns per unit of risk. TransMedics Group is currently generating about -0.17 per unit of risk. If you would invest  1,891  in Orthofix Medical on September 23, 2024 and sell it today you would lose (148.00) from holding Orthofix Medical or give up 7.83% of portfolio value over 90 days.

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

Orthofix Medical  vs.  TransMedics Group

Orthofix Medical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Orthofix Medical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Orthofix Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TransMedics Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TransMedics Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Orthofix Medical and TransMedics

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

The idea behind Orthofix Medical and TransMedics Group 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.