Correlation Between Inspire Medical and Shockwave Medical

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

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

Diversification Opportunities for Inspire Medical and Shockwave Medical

0.2

Correlation Coefficient

Inspire Medical  Shockwave Medical

Modest diversification

The 3 months correlation between Inspire and Shockwave is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and Shockwave Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shockwave Medical and Inspire Medical 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 Inspire Medical Systems are associated (or correlated) with Shockwave Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shockwave Medical has no effect on the direction of Inspire Medical i.e., Inspire Medical and Shockwave Medical go up and down completely randomly.

Pair Corralation between Inspire Medical and Shockwave Medical

If you would invest  26,845  in Shockwave Medical on July 27, 2024 and sell it today you would earn a total of  0.00  from holding Shockwave Medical or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

Inspire Medical Systems  vs.  Shockwave Medical

Inspire Medical Systems

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inspire Medical Systems are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Inspire Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Shockwave Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shockwave Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shockwave Medical is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Inspire Medical and Shockwave Medical

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

The idea behind Inspire Medical Systems and Shockwave 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.