Correlation Between AVITA Medical and GBS Software

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

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

Diversification Opportunities for AVITA Medical and GBS Software

-0.33

Correlation Coefficient

AVITA Medical  GBS Software

Very good diversification

The 3 months correlation between AVITA and GBS is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding AVITA Medical and GBS Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBS Software AG 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 GBS Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBS Software AG has no effect on the direction of AVITA Medical i.e., AVITA Medical and GBS Software go up and down completely randomly.

Pair Corralation between AVITA Medical and GBS Software

Assuming the 90 days trading horizon AVITA Medical is expected to under-perform the GBS Software. In addition to that, AVITA Medical is 2.08 times more volatile than GBS Software AG. It trades about -0.02 of its total potential returns per unit of risk. GBS Software AG is currently generating about 0.22 per unit of volatility. If you would invest  228.00  in GBS Software AG on October 26, 2024 and sell it today you would earn a total of  84.00  from holding GBS Software AG or generate 36.84% 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.  GBS Software AG

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.

GBS Software AG

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GBS Software AG are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, GBS Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AVITA Medical and GBS Software

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

The idea behind AVITA Medical and GBS Software AG 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.