Correlation Between TransMedics and Cardinal Health

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

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

Diversification Opportunities for TransMedics and Cardinal Health

-0.93

Correlation Coefficient

TransMedics  Cardinal Health

Pay attention - limited upside

The 3 months correlation between TransMedics and Cardinal is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding TransMedics Group and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health 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 Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of TransMedics i.e., TransMedics and Cardinal Health go up and down completely randomly.

Pair Corralation between TransMedics and Cardinal Health

Given the investment horizon of 90 days TransMedics Group is expected to generate 1.4 times more return on investment than Cardinal Health. However, TransMedics is 1.4 times more volatile than Cardinal Health. It trades about 0.04 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.0 per unit of risk. If you would invest  13,265  in TransMedics Group on March 7, 2024 and sell it today you would earn a total of  183.00  from holding TransMedics Group or generate 1.38% return on investment over 90 days.

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

TransMedics Group  vs.  Cardinal Health

TransMedics Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TransMedics Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, TransMedics showed solid returns over the last few months and may actually be approaching a breakup point.

Cardinal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cardinal Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with TransMedics and Cardinal Health

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

The idea behind TransMedics Group and Cardinal Health 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.