Correlation Between AVITA Medical and BANK OF CHINA -H-

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

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

Diversification Opportunities for AVITA Medical and BANK OF CHINA -H-

0.43

Correlation Coefficient

AVITA Medical  BANK OF CHINA -H-

Very weak diversification

The 3 months correlation between AVITA and BANK is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding AVITA Medical and BANK OF CHINA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OF CHINA -H- 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 BANK OF CHINA -H-. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OF CHINA -H- has no effect on the direction of AVITA Medical i.e., AVITA Medical and BANK OF CHINA -H- go up and down completely randomly.

Pair Corralation between AVITA Medical and BANK OF CHINA -H-

Assuming the 90 days trading horizon AVITA Medical is expected to generate 1.79 times less return on investment than BANK OF CHINA -H-. But when comparing it to its historical volatility, AVITA Medical is 1.28 times less risky than BANK OF CHINA -H-. It trades about 0.04 of its potential returns per unit of risk. BANK OF CHINA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  14.00  in BANK OF CHINA on October 11, 2024 and sell it today you would earn a total of  34.00  from holding BANK OF CHINA or generate 242.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

AVITA Medical  vs.  BANK OF CHINA

AVITA Medical

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AVITA Medical are ranked lower than 13 (%) 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.

BANK OF CHINA -H-

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BANK OF CHINA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, BANK OF CHINA -H- may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with AVITA Medical and BANK OF CHINA -H-

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

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