Correlation Between Inspire Medical and Monogram Orthopaedics

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

Diversification Opportunities for Inspire Medical and Monogram Orthopaedics

0.55

Correlation Coefficient

Inspire Medical  Monogram Orthopaedics

Very weak diversification

The 3 months correlation between Inspire and Monogram is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and Monogram Orthopaedics Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monogram Orthopaedics 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 Monogram Orthopaedics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monogram Orthopaedics has no effect on the direction of Inspire Medical i.e., Inspire Medical and Monogram Orthopaedics go up and down completely randomly.

Pair Corralation between Inspire Medical and Monogram Orthopaedics

Given the investment horizon of 90 days Inspire Medical Systems is expected to generate 0.56 times more return on investment than Monogram Orthopaedics. However, Inspire Medical Systems is 1.8 times less risky than Monogram Orthopaedics. It trades about 0.05 of its potential returns per unit of risk. Monogram Orthopaedics Common is currently generating about 0.02 per unit of risk. If you would invest  14,308  in Inspire Medical Systems on September 14, 2024 and sell it today you would earn a total of  4,475  from holding Inspire Medical Systems or generate 31.28% return on investment over 90 days.

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

Inspire Medical Systems  vs.  Monogram Orthopaedics Common

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 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.

Monogram Orthopaedics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Inspire Medical and Monogram Orthopaedics

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

The idea behind Inspire Medical Systems and Monogram Orthopaedics Common 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.