Correlation Between AVITA Medical and EuropaCorp

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

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

Diversification Opportunities for AVITA Medical and EuropaCorp

-0.46

Correlation Coefficient

AVITA Medical  EuropaCorp

Very good diversification

The 3 months correlation between AVITA and EuropaCorp is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding AVITA Medical and EuropaCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuropaCorp 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 EuropaCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EuropaCorp has no effect on the direction of AVITA Medical i.e., AVITA Medical and EuropaCorp go up and down completely randomly.

Pair Corralation between AVITA Medical and EuropaCorp

Assuming the 90 days trading horizon AVITA Medical is expected to under-perform the EuropaCorp. But the stock apears to be less risky and, when comparing its historical volatility, AVITA Medical is 1.22 times less risky than EuropaCorp. The stock trades about -0.09 of its potential returns per unit of risk. The EuropaCorp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  32.00  in EuropaCorp on December 4, 2024 and sell it today you would earn a total of  20.00  from holding EuropaCorp or generate 62.5% return on investment over 90 days.

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

AVITA Medical  vs.  EuropaCorp

AVITA Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days AVITA Medical 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 forward-looking signals remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

EuropaCorp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EuropaCorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EuropaCorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AVITA Medical and EuropaCorp

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

The idea behind AVITA Medical and EuropaCorp 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.