Correlation Between TransMedics and Edwards Lifesciences

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

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

Diversification Opportunities for TransMedics and Edwards Lifesciences

0.26

Correlation Coefficient

TransMedics  Edwards Lifesciences

Modest diversification

The 3 months correlation between TransMedics and Edwards is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding TransMedics Group 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 TransMedics 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 TransMedics Group 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 TransMedics i.e., TransMedics and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between TransMedics and Edwards Lifesciences

Given the investment horizon of 90 days TransMedics Group is expected to generate 2.62 times more return on investment than Edwards Lifesciences. However, TransMedics is 2.62 times more volatile than Edwards Lifesciences Corp. It trades about 0.08 of its potential returns per unit of risk. Edwards Lifesciences Corp is currently generating about -0.04 per unit of risk. If you would invest  5,928  in TransMedics Group on December 30, 2024 and sell it today you would earn a total of  930.00  from holding TransMedics Group or generate 15.69% return on investment over 90 days.

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

TransMedics Group  vs.  Edwards Lifesciences Corp

TransMedics Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TransMedics Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, TransMedics showed solid returns over the last few months and may actually be approaching a breakup point.

Edwards Lifesciences Corp

Risk-Adjusted Performance

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 newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with TransMedics and Edwards Lifesciences

The main advantage of trading using opposite TransMedics and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TransMedics 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 TransMedics Group 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.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.