Correlation Between Shockwave Medical and Insulet

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

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

Diversification Opportunities for Shockwave Medical and Insulet

-0.64

Correlation Coefficient

Shockwave Medical  Insulet

Excellent diversification

The 3 months correlation between Shockwave and Insulet is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Shockwave Medical and Insulet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insulet and Shockwave Medical 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 Shockwave Medical are associated (or correlated) with Insulet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insulet has no effect on the direction of Shockwave Medical i.e., Shockwave Medical and Insulet go up and down completely randomly.

Pair Corralation between Shockwave Medical and Insulet

Given the investment horizon of 90 days Shockwave Medical is expected to generate 1.97 times less return on investment than Insulet. But when comparing it to its historical volatility, Shockwave Medical is 7.02 times less risky than Insulet. It trades about 0.27 of its potential returns per unit of risk. Insulet is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  17,004  in Insulet on February 6, 2024 and sell it today you would earn a total of  439.00  from holding Insulet or generate 2.58% return on investment over 90 days.

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

Shockwave Medical  vs.  Insulet

Shockwave Medical

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shockwave Medical are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Shockwave Medical showed solid returns over the last few months and may actually be approaching a breakup point.

Insulet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Insulet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Shockwave Medical and Insulet

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

The idea behind Shockwave Medical and Insulet 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.