Correlation Between Avanos Medical and LENSAR

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

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

Diversification Opportunities for Avanos Medical and LENSAR

-0.86

Correlation Coefficient

Avanos Medical  LENSAR

Pay attention - limited upside

The 3 months correlation between Avanos and LENSAR is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Avanos Medical and LENSAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENSAR Inc and Avanos 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 Avanos Medical are associated (or correlated) with LENSAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LENSAR Inc has no effect on the direction of Avanos Medical i.e., Avanos Medical and LENSAR go up and down completely randomly.

Pair Corralation between Avanos Medical and LENSAR

Given the investment horizon of 90 days Avanos Medical is expected to generate 0.48 times more return on investment than LENSAR. However, Avanos Medical is 2.08 times less risky than LENSAR. It trades about -0.02 of its potential returns per unit of risk. LENSAR Inc is currently generating about -0.05 per unit of risk. If you would invest  1,603  in Avanos Medical on October 22, 2024 and sell it today you would lose (11.00) from holding Avanos Medical or give up 0.69% of portfolio value over 90 days.

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

Avanos Medical  vs.  LENSAR Inc

Avanos Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avanos Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

LENSAR Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, LENSAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avanos Medical and LENSAR

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

The idea behind Avanos Medical and LENSAR 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.