Correlation Between Advanced Medical and AVITA Medical

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

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

Diversification Opportunities for Advanced Medical and AVITA Medical

-0.17

Correlation Coefficient

Advanced Medical  AVITA Medical

Good diversification

The 3 months correlation between Advanced and AVITA is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions and AVITA Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVITA Medical and Advanced 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 Advanced Medical Solutions are associated (or correlated) with AVITA Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVITA Medical has no effect on the direction of Advanced Medical i.e., Advanced Medical and AVITA Medical go up and down completely randomly.

Pair Corralation between Advanced Medical and AVITA Medical

Assuming the 90 days trading horizon Advanced Medical Solutions is expected to generate 0.5 times more return on investment than AVITA Medical. However, Advanced Medical Solutions is 2.02 times less risky than AVITA Medical. It trades about 0.1 of its potential returns per unit of risk. AVITA Medical is currently generating about -0.32 per unit of risk. If you would invest  238.00  in Advanced Medical Solutions on October 26, 2024 and sell it today you would earn a total of  12.00  from holding Advanced Medical Solutions or generate 5.04% return on investment over 90 days.

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

Advanced Medical Solutions  vs.  AVITA Medical

Advanced Medical Sol

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Medical Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Advanced Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Advanced Medical and AVITA Medical

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

The idea behind Advanced Medical Solutions and AVITA Medical 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.