Correlation Between Inspire Medical and Bio Rad

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

Diversification Opportunities for Inspire Medical and Bio Rad

0.04

Correlation Coefficient

Inspire Medical  Bio Rad

Significant diversification

The 3 months correlation between Inspire and Bio is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and Bio Rad Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bio Rad Laboratories 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 Bio Rad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bio Rad Laboratories has no effect on the direction of Inspire Medical i.e., Inspire Medical and Bio Rad go up and down completely randomly.

Pair Corralation between Inspire Medical and Bio Rad

Given the investment horizon of 90 days Inspire Medical Systems is expected to generate 1.79 times more return on investment than Bio Rad. However, Inspire Medical is 1.79 times more volatile than Bio Rad Laboratories. It trades about 0.01 of its potential returns per unit of risk. Bio Rad Laboratories is currently generating about -0.01 per unit of risk. If you would invest  24,300  in Inspire Medical Systems on August 31, 2024 and sell it today you would lose (4,900) from holding Inspire Medical Systems or give up 20.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Inspire Medical Systems  vs.  Bio Rad Laboratories

Inspire Medical Systems

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inspire Medical Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Inspire Medical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Bio Rad Laboratories

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bio Rad Laboratories are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Bio Rad is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Inspire Medical and Bio Rad

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

The idea behind Inspire Medical Systems and Bio Rad Laboratories 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.