Correlation Between Inari Medical and Electromed

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

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

Diversification Opportunities for Inari Medical and Electromed

0.78

Correlation Coefficient

Inari Medical  Electromed

Poor diversification

The 3 months correlation between Inari and Electromed is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Inari Medical and Electromed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromed and Inari 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 Inari Medical are associated (or correlated) with Electromed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromed has no effect on the direction of Inari Medical i.e., Inari Medical and Electromed go up and down completely randomly.

Pair Corralation between Inari Medical and Electromed

Given the investment horizon of 90 days Inari Medical is expected to generate 1.56 times less return on investment than Electromed. In addition to that, Inari Medical is 1.18 times more volatile than Electromed. It trades about 0.12 of its total potential returns per unit of risk. Electromed is currently generating about 0.21 per unit of volatility. If you would invest  1,992  in Electromed on September 17, 2024 and sell it today you would earn a total of  826.00  from holding Electromed or generate 41.47% return on investment over 90 days.

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

Inari Medical  vs.  Electromed

Inari Medical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inari Medical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Inari Medical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Electromed

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electromed are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Electromed exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inari Medical and Electromed

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

The idea behind Inari Medical and Electromed 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.