Correlation Between TransMedics and Outset Medical

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

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

Diversification Opportunities for TransMedics and Outset Medical

-0.65

Correlation Coefficient

TransMedics  Outset Medical

Excellent diversification

The 3 months correlation between TransMedics and Outset is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding TransMedics Group and Outset Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outset Medical 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 Outset Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outset Medical has no effect on the direction of TransMedics i.e., TransMedics and Outset Medical go up and down completely randomly.

Pair Corralation between TransMedics and Outset Medical

Given the investment horizon of 90 days TransMedics Group is expected to under-perform the Outset Medical. But the stock apears to be less risky and, when comparing its historical volatility, TransMedics Group is 1.38 times less risky than Outset Medical. The stock trades about -0.15 of its potential returns per unit of risk. The Outset Medical is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Outset Medical on August 31, 2024 and sell it today you would earn a total of  33.00  from holding Outset Medical or generate 62.26% return on investment over 90 days.

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

TransMedics Group  vs.  Outset Medical

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 weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Outset Medical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Outset Medical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Outset Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TransMedics and Outset Medical

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

The idea behind TransMedics Group and Outset Medical 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.