Correlation Between AVITA Medical and Pfizer

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

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

Diversification Opportunities for AVITA Medical and Pfizer

-0.8

Correlation Coefficient

AVITA Medical  Pfizer

Pay attention - limited upside

The 3 months correlation between AVITA and Pfizer is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding AVITA Medical and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc 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 Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc has no effect on the direction of AVITA Medical i.e., AVITA Medical and Pfizer go up and down completely randomly.

Pair Corralation between AVITA Medical and Pfizer

Assuming the 90 days trading horizon AVITA Medical is expected to under-perform the Pfizer. In addition to that, AVITA Medical is 2.38 times more volatile than Pfizer Inc. It trades about -0.13 of its total potential returns per unit of risk. Pfizer Inc is currently generating about 0.08 per unit of volatility. If you would invest  2,468  in Pfizer Inc on September 23, 2024 and sell it today you would earn a total of  54.00  from holding Pfizer Inc or generate 2.19% return on investment over 90 days.

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

AVITA Medical  vs.  Pfizer Inc

AVITA Medical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AVITA Medical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, AVITA Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Pfizer Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfizer Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AVITA Medical and Pfizer

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

The idea behind AVITA Medical and Pfizer Inc 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.