Correlation Between TransMedics and Abbott Laboratories

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

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

Diversification Opportunities for TransMedics and Abbott Laboratories

-0.37

Correlation Coefficient

TransMedics  Abbott Laboratories

Very good diversification

The 3 months correlation between TransMedics and Abbott is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding TransMedics Group and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories 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 Abbott Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abbott Laboratories has no effect on the direction of TransMedics i.e., TransMedics and Abbott Laboratories go up and down completely randomly.

Pair Corralation between TransMedics and Abbott Laboratories

Given the investment horizon of 90 days TransMedics Group is expected to generate 3.54 times more return on investment than Abbott Laboratories. However, TransMedics is 3.54 times more volatile than Abbott Laboratories. It trades about 0.05 of its potential returns per unit of risk. Abbott Laboratories is currently generating about 0.04 per unit of risk. 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

TransMedics Group  vs.  Abbott Laboratories

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.

Abbott Laboratories

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Abbott Laboratories are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental drivers, Abbott Laboratories may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with TransMedics and Abbott Laboratories

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

The idea behind TransMedics Group and Abbott Laboratories 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.