Correlation Between Inspire Medical and ONWARD MEDICAL

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

Diversification Opportunities for Inspire Medical and ONWARD MEDICAL

0.02

Correlation Coefficient

Inspire Medical  ONWARD MEDICAL

Significant diversification

The 3 months correlation between Inspire and ONWARD is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and ONWARD MEDICAL BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONWARD MEDICAL BV 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 ONWARD MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONWARD MEDICAL BV has no effect on the direction of Inspire Medical i.e., Inspire Medical and ONWARD MEDICAL go up and down completely randomly.

Pair Corralation between Inspire Medical and ONWARD MEDICAL

Assuming the 90 days horizon Inspire Medical is expected to generate 68.12 times less return on investment than ONWARD MEDICAL. But when comparing it to its historical volatility, Inspire Medical Systems is 1.34 times less risky than ONWARD MEDICAL. It trades about 0.0 of its potential returns per unit of risk. ONWARD MEDICAL BV is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  462.00  in ONWARD MEDICAL BV on October 25, 2024 and sell it today you would earn a total of  120.00  from holding ONWARD MEDICAL BV or generate 25.97% return on investment over 90 days.

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

Inspire Medical Systems  vs.  ONWARD MEDICAL BV

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. Despite nearly stable basic indicators, Inspire Medical is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

ONWARD MEDICAL BV

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ONWARD MEDICAL BV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ONWARD MEDICAL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inspire Medical and ONWARD MEDICAL

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

The idea behind Inspire Medical Systems and ONWARD MEDICAL BV 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 Transaction History module to view history of all your transactions and understand their impact on performance.