Correlation Between Integra LifeSciences and Avita Medical

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

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

Diversification Opportunities for Integra LifeSciences and Avita Medical

0.86

Correlation Coefficient

Integra LifeSciences  Avita Medical

Very poor diversification

The 3 months correlation between Integra and Avita is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Integra LifeSciences Holdings and Avita Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avita Medical and Integra LifeSciences 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 Integra LifeSciences Holdings 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 Integra LifeSciences i.e., Integra LifeSciences and Avita Medical go up and down completely randomly.

Pair Corralation between Integra LifeSciences and Avita Medical

Given the investment horizon of 90 days Integra LifeSciences Holdings is expected to generate 0.57 times more return on investment than Avita Medical. However, Integra LifeSciences Holdings is 1.75 times less risky than Avita Medical. It trades about 0.08 of its potential returns per unit of risk. Avita Medical is currently generating about 0.03 per unit of risk. If you would invest  2,249  in Integra LifeSciences Holdings on September 19, 2024 and sell it today you would earn a total of  54.00  from holding Integra LifeSciences Holdings or generate 2.4% return on investment over 90 days.

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

Integra LifeSciences Holdings  vs.  Avita Medical

Integra LifeSciences

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Integra LifeSciences Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Integra LifeSciences unveiled solid returns over the last few months and may actually be approaching a breakup point.

Avita Medical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avita Medical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent 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 Integra LifeSciences and Avita Medical

The main advantage of trading using opposite Integra LifeSciences and Avita Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Integra LifeSciences 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 Integra LifeSciences Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..