Correlation Between Inspire Medical and Companhia Paranaense

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

Diversification Opportunities for Inspire Medical and Companhia Paranaense

-0.37

Correlation Coefficient

Inspire Medical  Companhia Paranaense

Very good diversification

The 3 months correlation between Inspire and Companhia is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense 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 Companhia Paranaense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Paranaense has no effect on the direction of Inspire Medical i.e., Inspire Medical and Companhia Paranaense go up and down completely randomly.

Pair Corralation between Inspire Medical and Companhia Paranaense

Assuming the 90 days horizon Inspire Medical Systems is expected to under-perform the Companhia Paranaense. But the stock apears to be less risky and, when comparing its historical volatility, Inspire Medical Systems is 1.48 times less risky than Companhia Paranaense. The stock trades about -0.09 of its potential returns per unit of risk. The Companhia Paranaense de is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  137.00  in Companhia Paranaense de on December 22, 2024 and sell it today you would earn a total of  25.00  from holding Companhia Paranaense de or generate 18.25% 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.  Companhia Paranaense de

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 uncertain 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.

Companhia Paranaense

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Paranaense de are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Companhia Paranaense reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inspire Medical and Companhia Paranaense

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

The idea behind Inspire Medical Systems and Companhia Paranaense de 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.