Correlation Between Tandem Diabetes and TransMedics

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

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

Diversification Opportunities for Tandem Diabetes and TransMedics

-0.18

Correlation Coefficient

Tandem Diabetes  TransMedics

Good diversification

The 3 months correlation between Tandem and TransMedics is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and TransMedics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransMedics Group and Tandem Diabetes 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 Tandem Diabetes Care 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 Tandem Diabetes i.e., Tandem Diabetes and TransMedics go up and down completely randomly.

Pair Corralation between Tandem Diabetes and TransMedics

Given the investment horizon of 90 days Tandem Diabetes Care is expected to under-perform the TransMedics. In addition to that, Tandem Diabetes is 1.24 times more volatile than TransMedics Group. It trades about -0.17 of its total potential returns per unit of risk. TransMedics Group is currently generating about 0.08 per unit of volatility. 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Tandem Diabetes Care  vs.  TransMedics Group

Tandem Diabetes Care

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tandem Diabetes Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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.

Pair Trading with Tandem Diabetes and TransMedics

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

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.