Correlation Between Penumbra and Inspire Medical

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

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

Diversification Opportunities for Penumbra and Inspire Medical

-0.59

Correlation Coefficient

Penumbra  Inspire Medical

Excellent diversification

The 3 months correlation between Penumbra and Inspire is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Penumbra 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 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 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 Penumbra i.e., Penumbra and Inspire Medical go up and down completely randomly.

Pair Corralation between Penumbra and Inspire Medical

Considering the 90-day investment horizon Penumbra is expected to generate 0.73 times more return on investment than Inspire Medical. However, Penumbra is 1.36 times less risky than Inspire Medical. It trades about 0.13 of its potential returns per unit of risk. Inspire Medical Systems is currently generating about 0.06 per unit of risk. If you would invest  20,497  in Penumbra on September 2, 2024 and sell it today you would earn a total of  3,915  from holding Penumbra or generate 19.1% return on investment over 90 days.

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

Penumbra  vs.  Inspire Medical Systems

Penumbra

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penumbra are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Penumbra displayed solid returns over the last few months and may actually be approaching a breakup point.

Inspire Medical Systems

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inspire Medical Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Inspire Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Penumbra and Inspire Medical

The main advantage of trading using opposite Penumbra and Inspire Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penumbra 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 Penumbra 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.