Correlation Between Penumbra and Inari Medical

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

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

Diversification Opportunities for Penumbra and Inari Medical

0.9

Correlation Coefficient

Penumbra  Inari Medical

Almost no diversification

The 3 months correlation between Penumbra and Inari is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Penumbra and Inari Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inari Medical 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 Inari Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inari Medical has no effect on the direction of Penumbra i.e., Penumbra and Inari Medical go up and down completely randomly.

Pair Corralation between Penumbra and Inari Medical

Considering the 90-day investment horizon Penumbra is expected to generate 1.08 times less return on investment than Inari Medical. But when comparing it to its historical volatility, Penumbra is 1.42 times less risky than Inari Medical. It trades about 0.14 of its potential returns per unit of risk. Inari Medical is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,308  in Inari Medical on September 4, 2024 and sell it today you would earn a total of  904.00  from holding Inari Medical or generate 20.98% return on investment over 90 days.

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

Penumbra  vs.  Inari Medical

Penumbra

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Penumbra are ranked lower than 11 (%) 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.

Inari Medical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inari Medical are ranked lower than 8 (%) 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.

Pair Trading with Penumbra and Inari Medical

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

The idea behind Penumbra and Inari Medical 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.