Correlation Between Edwards Lifesciences and TransMedics

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

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

Diversification Opportunities for Edwards Lifesciences and TransMedics

0.05

Correlation Coefficient

Edwards Lifesciences  TransMedics

Significant diversification

The 3 months correlation between Edwards and TransMedics is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Edwards Lifesciences Corp and TransMedics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransMedics Group and Edwards Lifesciences 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 Edwards Lifesciences 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 Edwards Lifesciences i.e., Edwards Lifesciences and TransMedics go up and down completely randomly.

Pair Corralation between Edwards Lifesciences and TransMedics

Allowing for the 90-day total investment horizon Edwards Lifesciences is expected to generate 7.25 times less return on investment than TransMedics. But when comparing it to its historical volatility, Edwards Lifesciences Corp is 1.92 times less risky than TransMedics. It trades about 0.01 of its potential returns per unit of risk. TransMedics Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,788  in TransMedics Group on July 27, 2024 and sell it today you would earn a total of  6,412  from holding TransMedics Group or generate 110.78% return on investment over 90 days.

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

Edwards Lifesciences Corp  vs.  TransMedics Group

Edwards Lifesciences Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Edwards Lifesciences 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

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.

Pair Trading with Edwards Lifesciences and TransMedics

The main advantage of trading using opposite Edwards Lifesciences and TransMedics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edwards Lifesciences 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 Edwards Lifesciences 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.