Correlation Between Inspire Medical and GeneDx Holdings

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

Diversification Opportunities for Inspire Medical and GeneDx Holdings

-0.65

Correlation Coefficient

Inspire Medical  GeneDx Holdings

Excellent diversification

The 3 months correlation between Inspire and GeneDx is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and GeneDx Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeneDx Holdings Corp 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 GeneDx Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeneDx Holdings Corp has no effect on the direction of Inspire Medical i.e., Inspire Medical and GeneDx Holdings go up and down completely randomly.

Pair Corralation between Inspire Medical and GeneDx Holdings

Given the investment horizon of 90 days Inspire Medical is expected to generate 15.17 times less return on investment than GeneDx Holdings. But when comparing it to its historical volatility, Inspire Medical Systems is 1.89 times less risky than GeneDx Holdings. It trades about 0.02 of its potential returns per unit of risk. GeneDx Holdings Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  377.00  in GeneDx Holdings Corp on September 26, 2024 and sell it today you would earn a total of  7,363  from holding GeneDx Holdings Corp or generate 1953.05% return on investment over 90 days.

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

Inspire Medical Systems  vs.  GeneDx Holdings Corp

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 uncertain 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.

GeneDx Holdings Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GeneDx Holdings Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, GeneDx Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inspire Medical and GeneDx Holdings

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

The idea behind Inspire Medical Systems and GeneDx Holdings Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.