Correlation Between Inspire Medical and Quidel

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

Diversification Opportunities for Inspire Medical and Quidel

0.84

Correlation Coefficient

Inspire Medical  Quidel

Very poor diversification

The 3 months correlation between Inspire and Quidel is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and Quidel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quidel 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 Quidel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quidel has no effect on the direction of Inspire Medical i.e., Inspire Medical and Quidel go up and down completely randomly.

Pair Corralation between Inspire Medical and Quidel

Given the investment horizon of 90 days Inspire Medical Systems is expected to generate 1.32 times more return on investment than Quidel. However, Inspire Medical is 1.32 times more volatile than Quidel. It trades about -0.05 of its potential returns per unit of risk. Quidel is currently generating about -0.14 per unit of risk. If you would invest  18,909  in Inspire Medical Systems on December 26, 2024 and sell it today you would lose (2,414) from holding Inspire Medical Systems or give up 12.77% 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.  Quidel

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.

Quidel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quidel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Inspire Medical and Quidel

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

The idea behind Inspire Medical Systems and Quidel 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..