Correlation Between Heart Test and Avita Medical

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

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

Diversification Opportunities for Heart Test and Avita Medical

0.0

Correlation Coefficient

Heart Test  Avita Medical

Pay attention - limited upside

The 3 months correlation between Heart and Avita is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Heart Test Laboratories and Avita Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avita Medical and Heart Test 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 Heart Test Laboratories 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 Heart Test i.e., Heart Test and Avita Medical go up and down completely randomly.

Pair Corralation between Heart Test and Avita Medical

Assuming the 90 days horizon Heart Test Laboratories is expected to generate 3.1 times more return on investment than Avita Medical. However, Heart Test is 3.1 times more volatile than Avita Medical. It trades about 0.16 of its potential returns per unit of risk. Avita Medical is currently generating about -0.06 per unit of risk. If you would invest  3.01  in Heart Test Laboratories on December 27, 2024 and sell it today you would earn a total of  1.19  from holding Heart Test Laboratories or generate 39.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	34.43%
Values	Daily Returns

Heart Test Laboratories  vs.  Avita Medical

Heart Test Laboratories

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heart Test Laboratories are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Heart Test showed solid returns over the last few months and may actually be approaching a breakup point.

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 Heart Test and Avita Medical

The main advantage of trading using opposite Heart Test and Avita Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heart Test 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 Heart Test Laboratories 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.