Correlation Between Stryker and Inari Medical

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

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

Diversification Opportunities for Stryker and Inari Medical

-0.64

Correlation Coefficient

Stryker  Inari Medical

Excellent diversification

The 3 months correlation between Stryker and Inari is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Stryker and Inari Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inari Medical and Stryker 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 Stryker are associated (or correlated) with Inari Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inari Medical has no effect on the direction of Stryker i.e., Stryker and Inari Medical go up and down completely randomly.

Pair Corralation between Stryker and Inari Medical

Considering the 90-day investment horizon Stryker is expected to generate 0.43 times more return on investment than Inari Medical. However, Stryker is 2.33 times less risky than Inari Medical. It trades about 0.09 of its potential returns per unit of risk. Inari Medical is currently generating about -0.01 per unit of risk. If you would invest  20,915  in Stryker on July 27, 2024 and sell it today you would earn a total of  15,075  from holding Stryker or generate 72.08% return on investment over 90 days.

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

Stryker  vs.  Inari Medical

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.

Inari Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inari Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in November 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Stryker and Inari Medical

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

The idea behind Stryker and Inari 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.