Correlation Between AVITA Medical and BE Semiconductor

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

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

Diversification Opportunities for AVITA Medical and BE Semiconductor

0.1

Correlation Coefficient

AVITA Medical  BE Semiconductor

Average diversification

The 3 months correlation between AVITA and BSI is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding AVITA Medical and BE Semiconductor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BE Semiconductor Ind 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 BE Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BE Semiconductor Ind has no effect on the direction of AVITA Medical i.e., AVITA Medical and BE Semiconductor go up and down completely randomly.

Pair Corralation between AVITA Medical and BE Semiconductor

Assuming the 90 days trading horizon AVITA Medical is expected to under-perform the BE Semiconductor. In addition to that, AVITA Medical is 2.51 times more volatile than BE Semiconductor Industries. It trades about -0.21 of its total potential returns per unit of risk. BE Semiconductor Industries is currently generating about 0.22 per unit of volatility. If you would invest  13,440  in BE Semiconductor Industries on October 22, 2024 and sell it today you would earn a total of  1,415  from holding BE Semiconductor Industries or generate 10.53% return on investment over 90 days.

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

AVITA Medical  vs.  BE Semiconductor Industries

AVITA Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVITA Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BE Semiconductor Ind

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BE Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AVITA Medical and BE Semiconductor

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

The idea behind AVITA Medical and BE Semiconductor Industries 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.