Correlation Between Stryker and TransMedics

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

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

Diversification Opportunities for Stryker and TransMedics

-0.23

Correlation Coefficient

Stryker  TransMedics

Very good diversification

The 3 months correlation between Stryker and TransMedics is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Stryker and TransMedics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransMedics Group and Stryker 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 Stryker 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 Stryker i.e., Stryker and TransMedics go up and down completely randomly.

Pair Corralation between Stryker and TransMedics

Considering the 90-day investment horizon Stryker is expected to generate 1.98 times less return on investment than TransMedics. But when comparing it to its historical volatility, Stryker is 3.1 times less risky than TransMedics. It trades about 0.09 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Stryker  vs.  TransMedics Group

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 weak basic indicators, Stryker 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 Stryker and TransMedics

The main advantage of trading using opposite Stryker and TransMedics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stryker 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 Stryker 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..