Correlation Between Inari MedicalInc and PulteGroup

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

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

Diversification Opportunities for Inari MedicalInc and PulteGroup

-0.65

Correlation Coefficient

Inari MedicalInc  PulteGroup

Excellent diversification

The 3 months correlation between Inari and PulteGroup is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Inari MedicalInc and PulteGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PulteGroup and Inari MedicalInc 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 Inari MedicalInc are associated (or correlated) with PulteGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PulteGroup has no effect on the direction of Inari MedicalInc i.e., Inari MedicalInc and PulteGroup go up and down completely randomly.

Pair Corralation between Inari MedicalInc and PulteGroup

Given the investment horizon of 90 days Inari MedicalInc is expected to under-perform the PulteGroup. In addition to that, Inari MedicalInc is 1.34 times more volatile than PulteGroup. It trades about -0.2 of its total potential returns per unit of risk. PulteGroup is currently generating about -0.05 per unit of volatility. If you would invest  11,569  in PulteGroup on January 25, 2024 and sell it today you would lose (343.00) from holding PulteGroup or give up 2.96% of portfolio value over 90 days.

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

Inari MedicalInc  vs.  PulteGroup

Inari MedicalInc

Risk-Adjusted Performance

0 of 100

Very Weak

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

PulteGroup

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PulteGroup are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, PulteGroup may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Inari MedicalInc and PulteGroup

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

The idea behind Inari MedicalInc and PulteGroup 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.