Correlation Between AVITA Medical and Japan Medical

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

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

Diversification Opportunities for AVITA Medical and Japan Medical

-0.11

Correlation Coefficient

AVITA Medical  Japan Medical

Good diversification

The 3 months correlation between AVITA and Japan is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding AVITA Medical and Japan Medical Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Medical Dynamic 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 Japan Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Medical Dynamic has no effect on the direction of AVITA Medical i.e., AVITA Medical and Japan Medical go up and down completely randomly.

Pair Corralation between AVITA Medical and Japan Medical

Assuming the 90 days trading horizon AVITA Medical is expected to under-perform the Japan Medical. In addition to that, AVITA Medical is 2.85 times more volatile than Japan Medical Dynamic. It trades about -0.12 of its total potential returns per unit of risk. Japan Medical Dynamic is currently generating about 0.07 per unit of volatility. If you would invest  353.00  in Japan Medical Dynamic on December 29, 2024 and sell it today you would earn a total of  26.00  from holding Japan Medical Dynamic or generate 7.37% 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.  Japan Medical Dynamic

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.

Japan Medical Dynamic

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Medical Dynamic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Medical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with AVITA Medical and Japan Medical

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

The idea behind AVITA Medical and Japan Medical Dynamic 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.