Correlation Between AVITA Medical and Hua Hong

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

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

Diversification Opportunities for AVITA Medical and Hua Hong

-0.29

Correlation Coefficient

AVITA Medical  Hua Hong

Very good diversification

The 3 months correlation between AVITA and Hua is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding AVITA Medical and Hua Hong Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Hong Semiconductor and AVITA 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 AVITA Medical are associated (or correlated) with Hua Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Hong Semiconductor has no effect on the direction of AVITA Medical i.e., AVITA Medical and Hua Hong go up and down completely randomly.

Pair Corralation between AVITA Medical and Hua Hong

Assuming the 90 days trading horizon AVITA Medical is expected to generate 1.51 times less return on investment than Hua Hong. But when comparing it to its historical volatility, AVITA Medical is 1.02 times less risky than Hua Hong. It trades about 0.03 of its potential returns per unit of risk. Hua Hong Semiconductor is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  193.00  in Hua Hong Semiconductor on October 8, 2024 and sell it today you would earn a total of  55.00  from holding Hua Hong Semiconductor or generate 28.5% return on investment over 90 days.

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

AVITA Medical  vs.  Hua Hong Semiconductor

AVITA Medical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AVITA Medical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, AVITA Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Hua Hong Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hua Hong Semiconductor 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with AVITA Medical and Hua Hong

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

The idea behind AVITA Medical and Hua Hong Semiconductor 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.