Correlation Between AVITA Medical and 01 Communique

Can any of the company-specific risk be diversified away by investing in both AVITA Medical and 01 Communique 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 01 Communique into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AVITA Medical and 01 Communique Laboratory, you can compare the effects of market volatilities on AVITA Medical and 01 Communique 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 01 Communique. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVITA Medical and 01 Communique.

Diversification Opportunities for AVITA Medical and 01 Communique

-0.14

Correlation Coefficient

AVITA Medical  01 Communique

Good diversification

The 3 months correlation between AVITA and DFK is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding AVITA Medical and 01 Communique Laboratory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 01 Communique Laboratory 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 01 Communique. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 01 Communique Laboratory has no effect on the direction of AVITA Medical i.e., AVITA Medical and 01 Communique go up and down completely randomly.

Pair Corralation between AVITA Medical and 01 Communique

Assuming the 90 days trading horizon AVITA Medical is expected to under-perform the 01 Communique. But the stock apears to be less risky and, when comparing its historical volatility, AVITA Medical is 5.24 times less risky than 01 Communique. The stock trades about -0.02 of its potential returns per unit of risk. The 01 Communique Laboratory is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2.20  in 01 Communique Laboratory on October 25, 2024 and sell it today you would earn a total of  24.80  from holding 01 Communique Laboratory or generate 1127.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

AVITA Medical  vs.  01 Communique Laboratory

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 nearly stable forward-looking signals, AVITA Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

01 Communique Laboratory

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 01 Communique Laboratory are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, 01 Communique reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AVITA Medical and 01 Communique

The main advantage of trading using opposite AVITA Medical and 01 Communique positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AVITA Medical position performs unexpectedly, 01 Communique 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 01 Communique will offset losses from the drop in 01 Communique's long position.

The idea behind AVITA Medical and 01 Communique Laboratory 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.