Correlation Between Boston Scientific and TransMedics

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Can any of the company-specific risk be diversified away by investing in both Boston Scientific 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 Boston Scientific and TransMedics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Scientific Corp and TransMedics Group, you can compare the effects of market volatilities on Boston Scientific 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 Boston Scientific with a short position of TransMedics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Scientific and TransMedics.

Diversification Opportunities for Boston Scientific and TransMedics

-0.49
  Correlation Coefficient

Very good diversification

The 3 months correlation between Boston and TransMedics is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Boston Scientific Corp and TransMedics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransMedics Group and Boston Scientific 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 Boston Scientific Corp 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 Boston Scientific i.e., Boston Scientific and TransMedics go up and down completely randomly.

Pair Corralation between Boston Scientific and TransMedics

Considering the 90-day investment horizon Boston Scientific is expected to generate 1.88 times less return on investment than TransMedics. But when comparing it to its historical volatility, Boston Scientific Corp is 3.79 times less risky than TransMedics. It trades about 0.13 of its potential returns per unit of risk. TransMedics Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,725  in TransMedics Group on July 27, 2024 and sell it today you would earn a total of  2,475  from holding TransMedics Group or generate 25.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Boston Scientific Corp  vs.  TransMedics Group

 Performance 
       Timeline  
Boston Scientific Corp 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Boston Scientific may actually be approaching a critical reversion point that can send shares even higher in November 2024.
TransMedics Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Boston Scientific and TransMedics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Boston Scientific and TransMedics

The main advantage of trading using opposite Boston Scientific and TransMedics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Scientific 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 Boston Scientific Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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