Correlation Between Inspire Medical and CVRx

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

Diversification Opportunities for Inspire Medical and CVRx

0.38

Correlation Coefficient

Inspire Medical  CVRx

Weak diversification

The 3 months correlation between Inspire and CVRx is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and CVRx Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVRx Inc 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 CVRx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVRx Inc has no effect on the direction of Inspire Medical i.e., Inspire Medical and CVRx go up and down completely randomly.

Pair Corralation between Inspire Medical and CVRx

Given the investment horizon of 90 days Inspire Medical Systems is expected to under-perform the CVRx. But the stock apears to be less risky and, when comparing its historical volatility, Inspire Medical Systems is 1.07 times less risky than CVRx. The stock trades about -0.05 of its potential returns per unit of risk. The CVRx Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,277  in CVRx Inc on December 28, 2024 and sell it today you would lose (44.00) from holding CVRx Inc or give up 3.45% of portfolio value over 90 days.

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

Inspire Medical Systems  vs.  CVRx Inc

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 latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

CVRx Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVRx Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, CVRx is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Inspire Medical and CVRx

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

The idea behind Inspire Medical Systems and CVRx Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.