Correlation Between Guardant Health and Inspire Medical

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

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

Diversification Opportunities for Guardant Health and Inspire Medical

0.07

Correlation Coefficient

Guardant Health  Inspire Medical

Significant diversification

The 3 months correlation between Guardant and Inspire is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Guardant Health and Inspire Medical Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspire Medical Systems and Guardant Health 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 Guardant Health are associated (or correlated) with Inspire Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspire Medical Systems has no effect on the direction of Guardant Health i.e., Guardant Health and Inspire Medical go up and down completely randomly.

Pair Corralation between Guardant Health and Inspire Medical

Allowing for the 90-day total investment horizon Guardant Health is expected to generate 1.02 times more return on investment than Inspire Medical. However, Guardant Health is 1.02 times more volatile than Inspire Medical Systems. It trades about 0.04 of its potential returns per unit of risk. Inspire Medical Systems is currently generating about 0.0 per unit of risk. If you would invest  2,936  in Guardant Health on November 20, 2024 and sell it today you would earn a total of  1,876  from holding Guardant Health or generate 63.9% return on investment over 90 days.

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

Guardant Health  vs.  Inspire Medical Systems

Guardant Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guardant Health are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Guardant Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Inspire Medical Systems

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Inspire Medical Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Inspire Medical 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 Guardant Health and Inspire Medical

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

The idea behind Guardant Health and Inspire Medical Systems 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.