Correlation Between Fonar and Avita Medical

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

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

Diversification Opportunities for Fonar and Avita Medical

0.14

Correlation Coefficient

Fonar  Avita Medical

Average diversification

The 3 months correlation between Fonar and Avita is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Fonar and Avita Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avita Medical and Fonar 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 Fonar 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 Fonar i.e., Fonar and Avita Medical go up and down completely randomly.

Pair Corralation between Fonar and Avita Medical

Given the investment horizon of 90 days Fonar is expected to under-perform the Avita Medical. But the stock apears to be less risky and, when comparing its historical volatility, Fonar is 2.41 times less risky than Avita Medical. The stock trades about -0.36 of its potential returns per unit of risk. The Avita Medical is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  880.00  in Avita Medical on December 10, 2024 and sell it today you would lose (48.00) from holding Avita Medical or give up 5.45% of portfolio value over 90 days.

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

Fonar  vs.  Avita Medical

Fonar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fonar has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Avita Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avita Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Fonar and Avita Medical

The main advantage of trading using opposite Fonar and Avita Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fonar 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 Fonar 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.