Correlation Between Inspire Medical and DexCom

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

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

Diversification Opportunities for Inspire Medical and DexCom

0.49

Correlation Coefficient

Inspire Medical  DexCom

Very weak diversification

The 3 months correlation between Inspire and DexCom is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and DexCom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DexCom Inc and Inspire Medical 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 Inspire Medical Systems are associated (or correlated) with DexCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DexCom Inc has no effect on the direction of Inspire Medical i.e., Inspire Medical and DexCom go up and down completely randomly.

Pair Corralation between Inspire Medical and DexCom

Given the investment horizon of 90 days Inspire Medical is expected to generate 2.67 times less return on investment than DexCom. In addition to that, Inspire Medical is 1.26 times more volatile than DexCom Inc. It trades about 0.02 of its total potential returns per unit of risk. DexCom Inc is currently generating about 0.05 per unit of volatility. If you would invest  7,203  in DexCom Inc on February 13, 2024 and sell it today you would earn a total of  5,312  from holding DexCom Inc or generate 73.75% return on investment over 90 days.

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

Inspire Medical Systems  vs.  DexCom Inc

Inspire Medical Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inspire Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Inspire Medical is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

DexCom Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, DexCom may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Inspire Medical and DexCom

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

The idea behind Inspire Medical Systems and DexCom Inc 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.