Correlation Between AVITA Medical and Datang International

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

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

Diversification Opportunities for AVITA Medical and Datang International

-0.49

Correlation Coefficient

AVITA Medical  Datang International

Very good diversification

The 3 months correlation between AVITA and Datang is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding AVITA Medical and Datang International Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang International 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 Datang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang International has no effect on the direction of AVITA Medical i.e., AVITA Medical and Datang International go up and down completely randomly.

Pair Corralation between AVITA Medical and Datang International

Assuming the 90 days trading horizon AVITA Medical is expected to generate 1.42 times less return on investment than Datang International. In addition to that, AVITA Medical is 1.15 times more volatile than Datang International Power. It trades about 0.02 of its total potential returns per unit of risk. Datang International Power is currently generating about 0.04 per unit of volatility. If you would invest  14.00  in Datang International Power on October 5, 2024 and sell it today you would earn a total of  3.00  from holding Datang International Power or generate 21.43% 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.  Datang International Power

AVITA Medical

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days AVITA Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile forward-looking signals, AVITA Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Datang International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Datang International Power 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 Datang International

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

The idea behind AVITA Medical and Datang International Power 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.