Correlation Between Inspire Medical and TransMedics

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

Diversification Opportunities for Inspire Medical and TransMedics

-0.06

Correlation Coefficient

Inspire Medical  TransMedics

Good diversification

The 3 months correlation between Inspire and TransMedics is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and TransMedics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransMedics Group 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 TransMedics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransMedics Group has no effect on the direction of Inspire Medical i.e., Inspire Medical and TransMedics go up and down completely randomly.

Pair Corralation between Inspire Medical and TransMedics

Given the investment horizon of 90 days Inspire Medical Systems is expected to generate 1.24 times more return on investment than TransMedics. However, Inspire Medical is 1.24 times more volatile than TransMedics Group. It trades about 0.16 of its potential returns per unit of risk. TransMedics Group is currently generating about -0.04 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Inspire Medical Systems  vs.  TransMedics Group

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.

TransMedics Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TransMedics Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Inspire Medical and TransMedics

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

The idea behind Inspire Medical Systems and TransMedics Group 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.