Correlation Between InMode and Nevro Corp

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

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

Diversification Opportunities for InMode and Nevro Corp

0.86

Correlation Coefficient

InMode  Nevro Corp

Very poor diversification

The 3 months correlation between InMode and Nevro is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding InMode and Nevro Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nevro Corp and InMode 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 InMode are associated (or correlated) with Nevro Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nevro Corp has no effect on the direction of InMode i.e., InMode and Nevro Corp go up and down completely randomly.

Pair Corralation between InMode and Nevro Corp

Given the investment horizon of 90 days InMode is expected to generate 6.67 times less return on investment than Nevro Corp. But when comparing it to its historical volatility, InMode is 2.18 times less risky than Nevro Corp. It trades about 0.06 of its potential returns per unit of risk. Nevro Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  372.00  in Nevro Corp on December 28, 2024 and sell it today you would earn a total of  212.00  from holding Nevro Corp or generate 56.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

InMode  vs.  Nevro Corp

InMode

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in InMode are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, InMode may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nevro Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nevro Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Nevro Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with InMode and Nevro Corp

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

The idea behind InMode and Nevro Corp 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.