Correlation Between Inspire Medical and Outset Medical

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

Diversification Opportunities for Inspire Medical and Outset Medical

-0.43

Correlation Coefficient

Inspire Medical  Outset Medical

Very good diversification

The 3 months correlation between Inspire and Outset is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and Outset Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outset 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 Outset Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outset Medical has no effect on the direction of Inspire Medical i.e., Inspire Medical and Outset Medical go up and down completely randomly.

Pair Corralation between Inspire Medical and Outset Medical

Given the investment horizon of 90 days Inspire Medical is expected to generate 1713.07 times less return on investment than Outset Medical. But when comparing it to its historical volatility, Inspire Medical Systems is 2.14 times less risky than Outset Medical. It trades about 0.0 of its potential returns per unit of risk. Outset Medical is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  54.00  in Outset Medical on August 31, 2024 and sell it today you would earn a total of  32.00  from holding Outset Medical or generate 59.26% return on investment over 90 days.

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

Inspire Medical Systems  vs.  Outset Medical

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.

Outset Medical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Outset Medical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Outset Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inspire Medical and Outset Medical

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

The idea behind Inspire Medical Systems and Outset 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.