Correlation Between Edgewise Therapeutics and InspireMD

Can any of the company-specific risk be diversified away by investing in both Edgewise Therapeutics and InspireMD 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 Edgewise Therapeutics and InspireMD into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Edgewise Therapeutics and InspireMD, you can compare the effects of market volatilities on Edgewise Therapeutics and InspireMD 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 Edgewise Therapeutics with a short position of InspireMD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edgewise Therapeutics and InspireMD.

Diversification Opportunities for Edgewise Therapeutics and InspireMD

-0.54

Correlation Coefficient

Edgewise Therapeutics  InspireMD

Excellent diversification

The 3 months correlation between Edgewise and InspireMD is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Edgewise Therapeutics and InspireMD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InspireMD and Edgewise Therapeutics 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 Edgewise Therapeutics are associated (or correlated) with InspireMD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InspireMD has no effect on the direction of Edgewise Therapeutics i.e., Edgewise Therapeutics and InspireMD go up and down completely randomly.

Pair Corralation between Edgewise Therapeutics and InspireMD

Given the investment horizon of 90 days Edgewise Therapeutics is expected to generate 1.66 times more return on investment than InspireMD. However, Edgewise Therapeutics is 1.66 times more volatile than InspireMD. It trades about 0.09 of its potential returns per unit of risk. InspireMD is currently generating about 0.01 per unit of risk. If you would invest  1,105  in Edgewise Therapeutics on October 5, 2024 and sell it today you would earn a total of  1,598  from holding Edgewise Therapeutics or generate 144.62% return on investment over 90 days.

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

Edgewise Therapeutics  vs.  InspireMD

Edgewise Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edgewise Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Edgewise Therapeutics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

InspireMD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InspireMD has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, InspireMD is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Edgewise Therapeutics and InspireMD

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

The idea behind Edgewise Therapeutics and InspireMD 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.