Correlation Between Integra LifeSciences and Inspire Medical

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

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

Diversification Opportunities for Integra LifeSciences and Inspire Medical

-0.6

Correlation Coefficient

Integra LifeSciences  Inspire Medical

Excellent diversification

The 3 months correlation between Integra and Inspire is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Integra LifeSciences Holdings 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 Integra LifeSciences 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 Integra LifeSciences Holdings 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 Integra LifeSciences i.e., Integra LifeSciences and Inspire Medical go up and down completely randomly.

Pair Corralation between Integra LifeSciences and Inspire Medical

Given the investment horizon of 90 days Integra LifeSciences Holdings is expected to under-perform the Inspire Medical. But the stock apears to be less risky and, when comparing its historical volatility, Integra LifeSciences Holdings is 1.05 times less risky than Inspire Medical. The stock trades about -0.05 of its potential returns per unit of risk. The Inspire Medical Systems is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  13,530  in Inspire Medical Systems on September 22, 2024 and sell it today you would earn a total of  5,247  from holding Inspire Medical Systems or generate 38.78% return on investment over 90 days.

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

Integra LifeSciences Holdings  vs.  Inspire Medical Systems

Integra LifeSciences

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Integra LifeSciences Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Integra LifeSciences unveiled solid returns over the last few months and may actually be approaching a breakup point.

Inspire Medical Systems

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Integra LifeSciences and Inspire Medical

The main advantage of trading using opposite Integra LifeSciences and Inspire Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Integra LifeSciences 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 Integra LifeSciences Holdings 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.