Correlation Between Inspire Medical and Align Technology

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

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

Diversification Opportunities for Inspire Medical and Align Technology

0.68

Correlation Coefficient

Inspire Medical  Align Technology

Poor diversification

The 3 months correlation between Inspire and Align is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology and Inspire Medical 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 Inspire Medical Systems are associated (or correlated) with Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of Inspire Medical i.e., Inspire Medical and Align Technology go up and down completely randomly.

Pair Corralation between Inspire Medical and Align Technology

Given the investment horizon of 90 days Inspire Medical Systems is expected to generate 1.57 times more return on investment than Align Technology. However, Inspire Medical is 1.57 times more volatile than Align Technology. It trades about -0.06 of its potential returns per unit of risk. Align Technology is currently generating about -0.19 per unit of risk. If you would invest  18,465  in Inspire Medical Systems on December 28, 2024 and sell it today you would lose (2,741) from holding Inspire Medical Systems or give up 14.84% of portfolio value over 90 days.

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

Inspire Medical Systems  vs.  Align Technology

Inspire Medical Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inspire Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Align Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Align Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Inspire Medical and Align Technology

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

The idea behind Inspire Medical Systems and Align Technology 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.