Correlation Between Inspire Medical and Outset MedicalInc

Can any of the company-specific risk be diversified away by investing in both Inspire Medical and Outset MedicalInc 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 Outset MedicalInc 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 Outset MedicalInc, you can compare the effects of market volatilities on Inspire Medical and Outset MedicalInc 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 Outset MedicalInc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inspire Medical and Outset MedicalInc.

Diversification Opportunities for Inspire Medical and Outset MedicalInc

-0.38

Correlation Coefficient

Inspire Medical  Outset MedicalInc

Very good diversification

The 3 months correlation between Inspire and Outset is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and Outset MedicalInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outset MedicalInc 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 Outset MedicalInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outset MedicalInc has no effect on the direction of Inspire Medical i.e., Inspire Medical and Outset MedicalInc go up and down completely randomly.

Pair Corralation between Inspire Medical and Outset MedicalInc

Given the investment horizon of 90 days Inspire Medical Systems is expected to generate 0.73 times more return on investment than Outset MedicalInc. However, Inspire Medical Systems is 1.38 times less risky than Outset MedicalInc. It trades about 0.05 of its potential returns per unit of risk. Outset MedicalInc is currently generating about -0.03 per unit of risk. If you would invest  14,334  in Inspire Medical Systems on February 14, 2024 and sell it today you would earn a total of  1,626  from holding Inspire Medical Systems or generate 11.34% return on investment over 90 days.

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

Inspire Medical Systems  vs.  Outset MedicalInc

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 latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Outset MedicalInc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Outset MedicalInc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Outset MedicalInc is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Inspire Medical and Outset MedicalInc

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

The idea behind Inspire Medical Systems and Outset MedicalInc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.