Correlation Between Inspira Technologies and STRATA Skin

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

By analyzing existing cross correlation between Inspira Technologies Oxy and STRATA Skin Sciences, you can compare the effects of market volatilities on Inspira Technologies and STRATA Skin 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 Inspira Technologies with a short position of STRATA Skin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inspira Technologies and STRATA Skin.

Diversification Opportunities for Inspira Technologies and STRATA Skin

0.24

Correlation Coefficient

Inspira Technologies  STRATA Skin

Modest diversification

The 3 months correlation between Inspira and STRATA is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Inspira Technologies Oxy and STRATA Skin Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRATA Skin Sciences and Inspira Technologies 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 Inspira Technologies Oxy are associated (or correlated) with STRATA Skin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRATA Skin Sciences has no effect on the direction of Inspira Technologies i.e., Inspira Technologies and STRATA Skin go up and down completely randomly.

Pair Corralation between Inspira Technologies and STRATA Skin

Assuming the 90 days horizon Inspira Technologies Oxy is expected to generate 6.07 times more return on investment than STRATA Skin. However, Inspira Technologies is 6.07 times more volatile than STRATA Skin Sciences. It trades about 0.05 of its potential returns per unit of risk. STRATA Skin Sciences is currently generating about 0.05 per unit of risk. If you would invest  29.00  in Inspira Technologies Oxy on September 30, 2024 and sell it today you would lose (8.00) from holding Inspira Technologies Oxy or give up 27.59% of portfolio value over 90 days.

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

Inspira Technologies Oxy  vs.  STRATA Skin Sciences

Inspira Technologies Oxy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inspira Technologies Oxy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Inspira Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

STRATA Skin Sciences

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STRATA Skin Sciences are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward-looking signals, STRATA Skin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Inspira Technologies and STRATA Skin

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

The idea behind Inspira Technologies Oxy and STRATA Skin Sciences 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.