Correlation Between Inspire Medical and Stryker

Can any of the company-specific risk be diversified away by investing in both Inspire Medical and Stryker 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 Stryker 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 Stryker, you can compare the effects of market volatilities on Inspire Medical and Stryker 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 Stryker. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inspire Medical and Stryker.

Diversification Opportunities for Inspire Medical and Stryker

0.69

Correlation Coefficient

Inspire Medical  Stryker

Poor diversification

The 3 months correlation between Inspire and Stryker is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and Stryker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stryker 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 Stryker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stryker has no effect on the direction of Inspire Medical i.e., Inspire Medical and Stryker go up and down completely randomly.

Pair Corralation between Inspire Medical and Stryker

Given the investment horizon of 90 days Inspire Medical Systems is expected to generate 3.9 times more return on investment than Stryker. However, Inspire Medical is 3.9 times more volatile than Stryker. It trades about 0.16 of its potential returns per unit of risk. Stryker is currently generating about 0.12 per unit of risk. If you would invest  13,361  in Inspire Medical Systems on July 27, 2024 and sell it today you would earn a total of  6,169  from holding Inspire Medical Systems or generate 46.17% return on investment over 90 days.

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

Inspire Medical Systems  vs.  Stryker

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.

Stryker

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stryker are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Stryker may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Inspire Medical and Stryker

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

The idea behind Inspire Medical Systems and Stryker 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.