Correlation Between Inspire Medical and Hua Hong

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

Diversification Opportunities for Inspire Medical and Hua Hong

0.23

Correlation Coefficient

Inspire Medical  Hua Hong

Modest diversification

The 3 months correlation between Inspire and Hua is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and Hua Hong Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Hong Semiconductor 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 Hua Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Hong Semiconductor has no effect on the direction of Inspire Medical i.e., Inspire Medical and Hua Hong go up and down completely randomly.

Pair Corralation between Inspire Medical and Hua Hong

Assuming the 90 days horizon Inspire Medical Systems is expected to generate 0.97 times more return on investment than Hua Hong. However, Inspire Medical Systems is 1.03 times less risky than Hua Hong. It trades about 0.01 of its potential returns per unit of risk. Hua Hong Semiconductor is currently generating about 0.0 per unit of risk. If you would invest  23,050  in Inspire Medical Systems on October 11, 2024 and sell it today you would lose (3,725) from holding Inspire Medical Systems or give up 16.16% of portfolio value over 90 days.

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

Inspire Medical Systems  vs.  Hua Hong Semiconductor

Inspire Medical Systems

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inspire Medical Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Inspire Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hua Hong Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hua Hong Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Inspire Medical and Hua Hong

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

The idea behind Inspire Medical Systems and Hua Hong Semiconductor 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..