Correlation Between Inspire Medical and News

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

Diversification Opportunities for Inspire Medical and News

-0.39

Correlation Coefficient

Inspire Medical  News

Very good diversification

The 3 months correlation between Inspire and News is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and News Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on News 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 News. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of News has no effect on the direction of Inspire Medical i.e., Inspire Medical and News go up and down completely randomly.

Pair Corralation between Inspire Medical and News

Assuming the 90 days horizon Inspire Medical is expected to generate 6.62 times less return on investment than News. In addition to that, Inspire Medical is 2.09 times more volatile than News Corporation. It trades about 0.0 of its total potential returns per unit of risk. News Corporation is currently generating about 0.07 per unit of volatility. If you would invest  1,755  in News Corporation on October 9, 2024 and sell it today you would earn a total of  1,145  from holding News Corporation or generate 65.24% 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.  News Corp.

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

News

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in News Corporation are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, News reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inspire Medical and News

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

The idea behind Inspire Medical Systems and News Corporation 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.