Correlation Between Insulet and Penumbra
Can any of the company-specific risk be diversified away by investing in both Insulet and Penumbra 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 Insulet and Penumbra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insulet and Penumbra, you can compare the effects of market volatilities on Insulet and Penumbra 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 Insulet with a short position of Penumbra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insulet and Penumbra.
Diversification Opportunities for Insulet and Penumbra
Very poor diversification
The 3 months correlation between Insulet and Penumbra is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Insulet and Penumbra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penumbra and Insulet 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 Insulet are associated (or correlated) with Penumbra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penumbra has no effect on the direction of Insulet i.e., Insulet and Penumbra go up and down completely randomly.
Pair Corralation between Insulet and Penumbra
Given the investment horizon of 90 days Insulet is expected to generate 0.74 times more return on investment than Penumbra. However, Insulet is 1.35 times less risky than Penumbra. It trades about 0.19 of its potential returns per unit of risk. Penumbra is currently generating about 0.13 per unit of risk. If you would invest 20,669 in Insulet on November 2, 2024 and sell it today you would earn a total of 7,334 from holding Insulet or generate 35.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insulet vs. Penumbra
Performance |
| Timeline |
| Insulet |
| Penumbra |
Insulet and Penumbra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insulet and Penumbra
The main advantage of trading using opposite Insulet and Penumbra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insulet position performs unexpectedly, Penumbra 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 Penumbra will offset losses from the drop in Penumbra's long position.| Insulet vs. DexCom Inc | Insulet vs. Integra LifeSciences Holdings | Insulet vs. Senseonics Holdings | Insulet vs. Edwards Lifesciences Corp |
| Penumbra vs. Insulet | Penumbra vs. TransMedics Group | Penumbra vs. Masimo | Penumbra vs. Inspire Medical Systems |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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