Correlation Between INSURANCE AUST and Inspire Medical

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

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

Diversification Opportunities for INSURANCE AUST and Inspire Medical

-0.22

Correlation Coefficient

INSURANCE AUST  Inspire Medical

Very good diversification

The 3 months correlation between INSURANCE and Inspire is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding INSURANCE AUST GRP and Inspire Medical Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspire Medical Systems and INSURANCE AUST 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 INSURANCE AUST GRP are associated (or correlated) with Inspire Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspire Medical Systems has no effect on the direction of INSURANCE AUST i.e., INSURANCE AUST and Inspire Medical go up and down completely randomly.

Pair Corralation between INSURANCE AUST and Inspire Medical

Assuming the 90 days trading horizon INSURANCE AUST GRP is expected to generate 0.66 times more return on investment than Inspire Medical. However, INSURANCE AUST GRP is 1.52 times less risky than Inspire Medical. It trades about 0.12 of its potential returns per unit of risk. Inspire Medical Systems is currently generating about 0.05 per unit of risk. If you would invest  454.00  in INSURANCE AUST GRP on October 11, 2024 and sell it today you would earn a total of  51.00  from holding INSURANCE AUST GRP or generate 11.23% return on investment over 90 days.

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

INSURANCE AUST GRP  vs.  Inspire Medical Systems

INSURANCE AUST GRP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INSURANCE AUST GRP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, INSURANCE AUST may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Inspire Medical Systems

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inspire Medical Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Inspire Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with INSURANCE AUST and Inspire Medical

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

The idea behind INSURANCE AUST GRP and Inspire Medical Systems 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.