Correlation Between TransMedics and Orthopediatrics Corp

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

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

Diversification Opportunities for TransMedics and Orthopediatrics Corp

0.46

Correlation Coefficient

TransMedics  Orthopediatrics Corp

Very weak diversification

The 3 months correlation between TransMedics and Orthopediatrics is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding TransMedics Group and Orthopediatrics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orthopediatrics 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 Orthopediatrics Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orthopediatrics Corp has no effect on the direction of TransMedics i.e., TransMedics and Orthopediatrics Corp go up and down completely randomly.

Pair Corralation between TransMedics and Orthopediatrics Corp

Given the investment horizon of 90 days TransMedics Group is expected to generate 1.54 times more return on investment than Orthopediatrics Corp. However, TransMedics is 1.54 times more volatile than Orthopediatrics Corp. It trades about 0.05 of its potential returns per unit of risk. Orthopediatrics Corp is currently generating about 0.01 per unit of risk. If you would invest  4,513  in TransMedics Group on October 5, 2024 and sell it today you would earn a total of  2,396  from holding TransMedics Group or generate 53.09% return on investment over 90 days.

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

TransMedics Group  vs.  Orthopediatrics Corp

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Orthopediatrics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orthopediatrics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Orthopediatrics Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TransMedics and Orthopediatrics Corp

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

The idea behind TransMedics Group and Orthopediatrics 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.