Correlation Between InMode and SJM Holdings

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

By analyzing existing cross correlation between InMode and SJM Holdings Ltd, you can compare the effects of market volatilities on InMode and SJM Holdings 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 SJM Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of InMode and SJM Holdings.

Diversification Opportunities for InMode and SJM Holdings

-0.45

Correlation Coefficient

InMode  SJM Holdings

Very good diversification

The 3 months correlation between InMode and SJM is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding InMode and SJM Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SJM Holdings 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 SJM Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SJM Holdings has no effect on the direction of InMode i.e., InMode and SJM Holdings go up and down completely randomly.

Pair Corralation between InMode and SJM Holdings

Given the investment horizon of 90 days InMode is expected to under-perform the SJM Holdings. But the stock apears to be less risky and, when comparing its historical volatility, InMode is 1.65 times less risky than SJM Holdings. The stock trades about -0.02 of its potential returns per unit of risk. The SJM Holdings Ltd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  115.00  in SJM Holdings Ltd on September 14, 2024 and sell it today you would lose (5.00) from holding SJM Holdings Ltd or give up 4.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

InMode  vs.  SJM Holdings Ltd

InMode

Risk-Adjusted Performance

4 of 100

Insignificant

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 January 2025.

SJM Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SJM Holdings Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, SJM Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with InMode and SJM Holdings

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

The idea behind InMode and SJM Holdings Ltd 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.