Correlation Between TransMedics and Tela Bio

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

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

Diversification Opportunities for TransMedics and Tela Bio

-0.78

Correlation Coefficient

TransMedics  Tela Bio

Pay attention - limited upside

The 3 months correlation between TransMedics and Tela is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding TransMedics Group and Tela Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tela Bio 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 Tela Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tela Bio has no effect on the direction of TransMedics i.e., TransMedics and Tela Bio go up and down completely randomly.

Pair Corralation between TransMedics and Tela Bio

Given the investment horizon of 90 days TransMedics Group is expected to under-perform the Tela Bio. In addition to that, TransMedics is 1.54 times more volatile than Tela Bio. It trades about -0.17 of its total potential returns per unit of risk. Tela Bio is currently generating about -0.07 per unit of volatility. If you would invest  301.00  in Tela Bio on September 23, 2024 and sell it today you would lose (16.00) from holding Tela Bio or give up 5.32% of portfolio value over 90 days.

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

TransMedics Group  vs.  Tela Bio

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.

Tela Bio

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tela Bio are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent essential indicators, Tela Bio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TransMedics and Tela Bio

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

The idea behind TransMedics Group and Tela Bio 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.