Correlation Between Lucid Diagnostics and Inari Medical

Can any of the company-specific risk be diversified away by investing in both Lucid Diagnostics and Inari 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 Lucid Diagnostics and Inari Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lucid Diagnostics and Inari Medical, you can compare the effects of market volatilities on Lucid Diagnostics and Inari 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 Lucid Diagnostics with a short position of Inari Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucid Diagnostics and Inari Medical.

Diversification Opportunities for Lucid Diagnostics and Inari Medical

0.65

Correlation Coefficient

Lucid Diagnostics  Inari Medical

Poor diversification

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

Pair Corralation between Lucid Diagnostics and Inari Medical

Given the investment horizon of 90 days Lucid Diagnostics is expected to generate 1.19 times less return on investment than Inari Medical. But when comparing it to its historical volatility, Lucid Diagnostics is 1.18 times less risky than Inari Medical. It trades about 0.18 of its potential returns per unit of risk. Inari Medical is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,156  in Inari Medical on December 5, 2024 and sell it today you would earn a total of  2,841  from holding Inari Medical or generate 55.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	86.44%
Values	Daily Returns

Lucid Diagnostics  vs.  Inari Medical

Lucid Diagnostics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lucid Diagnostics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Lucid Diagnostics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Inari Medical

Risk-Adjusted Performance

Good

Over the last 90 days Inari Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly abnormal basic indicators, Inari Medical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lucid Diagnostics and Inari Medical

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

The idea behind Lucid Diagnostics and Inari 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.

Check out your portfolio center.

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.