Correlation Between Inspire Medical and Avanos Medical

Can any of the company-specific risk be diversified away by investing in both Inspire Medical and Avanos 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 Inspire Medical and Avanos Medical 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 Avanos Medical, you can compare the effects of market volatilities on Inspire Medical and Avanos 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 Inspire Medical with a short position of Avanos Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inspire Medical and Avanos Medical.

Diversification Opportunities for Inspire Medical and Avanos Medical

0.8

Correlation Coefficient

Inspire Medical  Avanos Medical

Very poor diversification

The 3 months correlation between Inspire and Avanos is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and Avanos Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanos Medical 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 Avanos Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanos Medical has no effect on the direction of Inspire Medical i.e., Inspire Medical and Avanos Medical go up and down completely randomly.

Pair Corralation between Inspire Medical and Avanos Medical

Given the investment horizon of 90 days Inspire Medical Systems is expected to generate 0.94 times more return on investment than Avanos Medical. However, Inspire Medical Systems is 1.06 times less risky than Avanos Medical. It trades about -0.03 of its potential returns per unit of risk. Avanos Medical is currently generating about -0.11 per unit of risk. If you would invest  20,368  in Inspire Medical Systems on September 12, 2024 and sell it today you would lose (1,426) from holding Inspire Medical Systems or give up 7.0% of portfolio value over 90 days.

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

Inspire Medical Systems  vs.  Avanos Medical

Inspire Medical Systems

Risk-Adjusted Performance

0 of 100

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 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.

Avanos Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avanos Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Inspire Medical and Avanos Medical

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

The idea behind Inspire Medical Systems and Avanos Medical 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.