Correlation Between Medtronic PLC and InMode

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

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

Diversification Opportunities for Medtronic PLC and InMode

0.63

Correlation Coefficient

Medtronic PLC  InMode

Poor diversification

The 3 months correlation between Medtronic and InMode is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Medtronic PLC and InMode in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InMode and Medtronic PLC 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 Medtronic PLC are associated (or correlated) with InMode. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InMode has no effect on the direction of Medtronic PLC i.e., Medtronic PLC and InMode go up and down completely randomly.

Pair Corralation between Medtronic PLC and InMode

Considering the 90-day investment horizon Medtronic PLC is expected to generate 1.04 times less return on investment than InMode. But when comparing it to its historical volatility, Medtronic PLC is 1.24 times less risky than InMode. It trades about 0.11 of its potential returns per unit of risk. InMode is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,663  in InMode on December 29, 2024 and sell it today you would earn a total of  167.00  from holding InMode or generate 10.04% return on investment over 90 days.

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

Medtronic PLC  vs.  InMode

Medtronic PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medtronic PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Medtronic PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

InMode

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in InMode are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, InMode may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Medtronic PLC and InMode

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

The idea behind Medtronic PLC and InMode 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.