Correlation Between Insulet and Inspire Medical

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

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

Diversification Opportunities for Insulet and Inspire Medical

0.32

Correlation Coefficient

Insulet  Inspire Medical

Weak diversification

The 3 months correlation between Insulet and Inspire is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Insulet 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 Insulet 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 Insulet 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 Insulet i.e., Insulet and Inspire Medical go up and down completely randomly.

Pair Corralation between Insulet and Inspire Medical

Given the investment horizon of 90 days Insulet is expected to generate 0.58 times more return on investment than Inspire Medical. However, Insulet is 1.71 times less risky than Inspire Medical. It trades about 0.0 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  26,336  in Insulet on December 29, 2024 and sell it today you would lose (461.00) from holding Insulet or give up 1.75% of portfolio value over 90 days.

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

Insulet  vs.  Inspire Medical Systems

Insulet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insulet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Insulet is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Inspire Medical Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inspire Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Insulet and Inspire Medical

The main advantage of trading using opposite Insulet and Inspire Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insulet 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 Insulet 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.