Correlation Between Inspire Medical and Peijia Medical

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

Diversification Opportunities for Inspire Medical and Peijia Medical

-0.63

Correlation Coefficient

Inspire Medical  Peijia Medical

Excellent diversification

The 3 months correlation between Inspire and Peijia is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and Peijia Medical Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peijia Medical 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 Peijia Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peijia Medical has no effect on the direction of Inspire Medical i.e., Inspire Medical and Peijia Medical go up and down completely randomly.

Pair Corralation between Inspire Medical and Peijia Medical

Assuming the 90 days horizon Inspire Medical Systems is expected to under-perform the Peijia Medical. But the stock apears to be less risky and, when comparing its historical volatility, Inspire Medical Systems is 1.3 times less risky than Peijia Medical. The stock trades about -0.11 of its potential returns per unit of risk. The Peijia Medical Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Peijia Medical Limited on December 21, 2024 and sell it today you would earn a total of  11.00  from holding Peijia Medical Limited or generate 24.44% return on investment over 90 days.

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

Inspire Medical Systems  vs.  Peijia Medical Limited

Inspire Medical Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inspire Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Peijia Medical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Peijia Medical Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Peijia Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inspire Medical and Peijia Medical

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

The idea behind Inspire Medical Systems and Peijia Medical Limited 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.