Correlation Between TransMedics and Pulmonx Corp

Can any of the company-specific risk be diversified away by investing in both TransMedics and Pulmonx 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 Pulmonx 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 Pulmonx Corp, you can compare the effects of market volatilities on TransMedics and Pulmonx 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 Pulmonx Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of TransMedics and Pulmonx Corp.

Diversification Opportunities for TransMedics and Pulmonx Corp

0.66

Correlation Coefficient

TransMedics  Pulmonx Corp

Poor diversification

The 3 months correlation between TransMedics and Pulmonx is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding TransMedics Group and Pulmonx Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pulmonx 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 Pulmonx Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pulmonx Corp has no effect on the direction of TransMedics i.e., TransMedics and Pulmonx Corp go up and down completely randomly.

Pair Corralation between TransMedics and Pulmonx Corp

Given the investment horizon of 90 days TransMedics Group is expected to under-perform the Pulmonx Corp. In addition to that, TransMedics is 1.36 times more volatile than Pulmonx Corp. It trades about -0.24 of its total potential returns per unit of risk. Pulmonx Corp is currently generating about -0.09 per unit of volatility. If you would invest  819.00  in Pulmonx Corp on September 23, 2024 and sell it today you would lose (204.00) from holding Pulmonx Corp or give up 24.91% of portfolio value over 90 days.

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

TransMedics Group  vs.  Pulmonx 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pulmonx Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pulmonx Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with TransMedics and Pulmonx Corp

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

The idea behind TransMedics Group and Pulmonx 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.