Correlation Between Insulet and Medtronic PLC

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

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

Diversification Opportunities for Insulet and Medtronic PLC

0.77

Correlation Coefficient

Insulet  Medtronic PLC

Poor diversification

The 3 months correlation between Insulet and Medtronic is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Insulet and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic PLC and Insulet 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 Insulet are associated (or correlated) with Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of Insulet i.e., Insulet and Medtronic PLC go up and down completely randomly.

Pair Corralation between Insulet and Medtronic PLC

Assuming the 90 days horizon Insulet is expected to generate 19.56 times less return on investment than Medtronic PLC. In addition to that, Insulet is 1.12 times more volatile than Medtronic PLC. It trades about 0.01 of its total potential returns per unit of risk. Medtronic PLC is currently generating about 0.22 per unit of volatility. If you would invest  8,405  in Medtronic PLC on November 19, 2024 and sell it today you would earn a total of  355.00  from holding Medtronic PLC or generate 4.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Insulet  vs.  Medtronic PLC

Insulet

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Insulet are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Insulet may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Medtronic PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Medtronic PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Medtronic PLC may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Insulet and Medtronic PLC

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

The idea behind Insulet and Medtronic PLC 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.