Correlation Between British American and Inspire Medical
Can any of the company-specific risk be diversified away by investing in both British American and Inspire 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 British American and Inspire Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Inspire Medical Systems, you can compare the effects of market volatilities on British American and Inspire 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 British American with a short position of Inspire Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Inspire Medical.
Diversification Opportunities for British American and Inspire Medical
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between British and Inspire is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Inspire Medical Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspire Medical Systems and British American 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 British American Tobacco are associated (or correlated) with Inspire Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspire Medical Systems has no effect on the direction of British American i.e., British American and Inspire Medical go up and down completely randomly.
Pair Corralation between British American and Inspire Medical
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.23 times more return on investment than Inspire Medical. However, British American Tobacco is 4.29 times less risky than Inspire Medical. It trades about 0.03 of its potential returns per unit of risk. Inspire Medical Systems is currently generating about -0.09 per unit of risk. If you would invest 3,503 in British American Tobacco on October 20, 2024 and sell it today you would earn a total of 12.00 from holding British American Tobacco or generate 0.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Inspire Medical Systems
Performance |
| Timeline |
| British American Tobacco |
| Inspire Medical Systems |
British American and Inspire Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Inspire Medical
The main advantage of trading using opposite British American and Inspire Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Inspire 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 Inspire Medical will offset losses from the drop in Inspire Medical's long position.| British American vs. Corporate Office Properties | British American vs. AUTO TRADER ADR | British American vs. TRADELINK ELECTRON | British American vs. Fast Retailing Co |
| Inspire Medical vs. Vienna Insurance Group | Inspire Medical vs. Singapore Reinsurance | Inspire Medical vs. Goosehead Insurance | Inspire Medical vs. Reinsurance Group of |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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