Correlation Between Penumbra and InMode

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

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

Diversification Opportunities for Penumbra and InMode

0.7

Correlation Coefficient

Penumbra  InMode

Poor diversification

The 3 months correlation between Penumbra and InMode is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Penumbra and InMode in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InMode and Penumbra 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 Penumbra 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 Penumbra i.e., Penumbra and InMode go up and down completely randomly.

Pair Corralation between Penumbra and InMode

Considering the 90-day investment horizon Penumbra is expected to generate 1.33 times more return on investment than InMode. However, Penumbra is 1.33 times more volatile than InMode. It trades about 0.09 of its potential returns per unit of risk. InMode is currently generating about 0.09 per unit of risk. If you would invest  23,818  in Penumbra on December 29, 2024 and sell it today you would earn a total of  3,144  from holding Penumbra or generate 13.2% return on investment over 90 days.

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

Penumbra  vs.  InMode

Penumbra

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Penumbra are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Penumbra displayed solid returns over the last few months and may actually be approaching a breakup point.

InMode

Risk-Adjusted Performance

Insignificant

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 Penumbra and InMode

The main advantage of trading using opposite Penumbra and InMode positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penumbra 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 Penumbra 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.