Correlation Between Inspire Medical and Royal Bank

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

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

Diversification Opportunities for Inspire Medical and Royal Bank

-0.58

Correlation Coefficient

Inspire Medical  Royal Bank

Excellent diversification

The 3 months correlation between Inspire and Royal is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Inspire Medical Systems and Royal Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Bank and Inspire 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 Inspire Medical Systems are associated (or correlated) with Royal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Bank has no effect on the direction of Inspire Medical i.e., Inspire Medical and Royal Bank go up and down completely randomly.

Pair Corralation between Inspire Medical and Royal Bank

Assuming the 90 days horizon Inspire Medical Systems is expected to under-perform the Royal Bank. In addition to that, Inspire Medical is 2.22 times more volatile than Royal Bank of. It trades about -0.12 of its total potential returns per unit of risk. Royal Bank of is currently generating about 0.15 per unit of volatility. If you would invest  10,264  in Royal Bank of on April 24, 2025 and sell it today you would earn a total of  1,076  from holding Royal Bank of or generate 10.48% return on investment over 90 days.

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

Inspire Medical Systems  vs.  Royal Bank of

Inspire Medical Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inspire Medical Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Royal Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Bank of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Royal Bank may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Inspire Medical and Royal Bank

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

The idea behind Inspire Medical Systems and Royal Bank of 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.