Correlation Between Inspecs Group and Smith Nephew

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

By analyzing existing cross correlation between Inspecs Group plc and Smith Nephew SNATS, you can compare the effects of market volatilities on Inspecs Group and Smith Nephew 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 Inspecs Group with a short position of Smith Nephew. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inspecs Group and Smith Nephew.

Diversification Opportunities for Inspecs Group and Smith Nephew

-0.36

Correlation Coefficient

Inspecs Group  Smith Nephew

Very good diversification

The 3 months correlation between Inspecs and Smith is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Inspecs Group plc and Smith Nephew SNATS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew SNATS and Inspecs Group 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 Inspecs Group plc are associated (or correlated) with Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew SNATS has no effect on the direction of Inspecs Group i.e., Inspecs Group and Smith Nephew go up and down completely randomly.

Pair Corralation between Inspecs Group and Smith Nephew

Assuming the 90 days trading horizon Inspecs Group plc is expected to generate 2.28 times more return on investment than Smith Nephew. However, Inspecs Group is 2.28 times more volatile than Smith Nephew SNATS. It trades about 0.31 of its potential returns per unit of risk. Smith Nephew SNATS is currently generating about -0.1 per unit of risk. If you would invest  4,650  in Inspecs Group plc on August 10, 2025 and sell it today you would earn a total of  2,350  from holding Inspecs Group plc or generate 50.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Inspecs Group plc  vs.  Smith Nephew SNATS

Inspecs Group plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inspecs Group plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Inspecs Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Smith Nephew SNATS

Risk-Adjusted Performance

Weakest

Over the last 90 days Smith Nephew SNATS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Smith Nephew is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Inspecs Group and Smith Nephew

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

The idea behind Inspecs Group plc and Smith Nephew SNATS 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.