Correlation Between Caribou Biosciences and Avita Medical

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

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

Diversification Opportunities for Caribou Biosciences and Avita Medical

0.26

Correlation Coefficient

Caribou Biosciences  Avita Medical

Modest diversification

The 3 months correlation between Caribou and Avita is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Caribou Biosciences and Avita Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avita Medical and Caribou Biosciences 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 Caribou Biosciences 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 Caribou Biosciences i.e., Caribou Biosciences and Avita Medical go up and down completely randomly.

Pair Corralation between Caribou Biosciences and Avita Medical

Given the investment horizon of 90 days Caribou Biosciences is expected to generate 2.88 times less return on investment than Avita Medical. In addition to that, Caribou Biosciences is 1.41 times more volatile than Avita Medical. It trades about 0.03 of its total potential returns per unit of risk. Avita Medical is currently generating about 0.13 per unit of volatility. If you would invest  772.00  in Avita Medical on September 29, 2024 and sell it today you would earn a total of  577.00  from holding Avita Medical or generate 74.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Caribou Biosciences  vs.  Avita Medical

Caribou Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caribou Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Avita Medical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avita Medical are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Avita Medical disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caribou Biosciences and Avita Medical

The main advantage of trading using opposite Caribou Biosciences and Avita Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caribou Biosciences 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 Caribou Biosciences 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.