Correlation Between Laboratory and Inari Medical

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

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

Diversification Opportunities for Laboratory and Inari Medical

0.83

Correlation Coefficient

Laboratory  Inari Medical

Very poor diversification

The 3 months correlation between Laboratory and Inari is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Laboratory of and Inari Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inari Medical and Laboratory 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 Laboratory of 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 Laboratory i.e., Laboratory and Inari Medical go up and down completely randomly.

Pair Corralation between Laboratory and Inari Medical

Allowing for the 90-day total investment horizon Laboratory is expected to generate 3.79 times less return on investment than Inari Medical. But when comparing it to its historical volatility, Laboratory of is 2.5 times less risky than Inari Medical. It trades about 0.07 of its potential returns per unit of risk. Inari Medical is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,374  in Inari Medical on September 3, 2024 and sell it today you would earn a total of  838.00  from holding Inari Medical or generate 19.16% return on investment over 90 days.

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

Laboratory of  vs.  Inari Medical

Laboratory

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Laboratory of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Laboratory is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Inari Medical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inari Medical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Inari Medical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Laboratory and Inari Medical

The main advantage of trading using opposite Laboratory and Inari Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laboratory 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 Laboratory of 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.