Correlation Between TransMedics and Stryker

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

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

Diversification Opportunities for TransMedics and Stryker

-0.68

Correlation Coefficient

TransMedics  Stryker

Excellent diversification

The 3 months correlation between TransMedics and Stryker is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding TransMedics Group and Stryker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stryker 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 Stryker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stryker has no effect on the direction of TransMedics i.e., TransMedics and Stryker go up and down completely randomly.

Pair Corralation between TransMedics and Stryker

Given the investment horizon of 90 days TransMedics Group is expected to under-perform the Stryker. In addition to that, TransMedics is 6.11 times more volatile than Stryker. It trades about -0.26 of its total potential returns per unit of risk. Stryker is currently generating about 0.31 per unit of volatility. If you would invest  35,601  in Stryker on August 28, 2024 and sell it today you would earn a total of  2,890  from holding Stryker or generate 8.12% return on investment over 90 days.

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

TransMedics Group  vs.  Stryker

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Stryker

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stryker are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Stryker may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with TransMedics and Stryker

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

The idea behind TransMedics Group and Stryker 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.