Correlation Between SoundHound and InMode

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

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

Diversification Opportunities for SoundHound and InMode

-0.63

Correlation Coefficient

SoundHound  InMode

Excellent diversification

The 3 months correlation between SoundHound and InMode is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding SoundHound AI and InMode in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InMode and SoundHound 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 SoundHound AI 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 SoundHound i.e., SoundHound and InMode go up and down completely randomly.

Pair Corralation between SoundHound and InMode

Given the investment horizon of 90 days SoundHound AI is expected to under-perform the InMode. In addition to that, SoundHound is 4.32 times more volatile than InMode. It trades about -0.1 of its total potential returns per unit of risk. InMode is currently generating about 0.2 per unit of volatility. If you would invest  1,721  in InMode on December 2, 2024 and sell it today you would earn a total of  151.00  from holding InMode or generate 8.77% return on investment over 90 days.

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

SoundHound AI  vs.  InMode

SoundHound AI

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SoundHound AI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SoundHound displayed solid returns over the last few months and may actually be approaching a breakup point.

InMode

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SoundHound and InMode

The main advantage of trading using opposite SoundHound and InMode positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoundHound 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 SoundHound AI 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.