Correlation Between InMode and Avita Medical

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Can any of the company-specific risk be diversified away by investing in both InMode 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 InMode and Avita Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between InMode and Avita Medical, you can compare the effects of market volatilities on InMode 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 InMode with a short position of Avita Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of InMode and Avita Medical.

Diversification Opportunities for InMode and Avita Medical

InModeAvitaDiversified AwayInModeAvitaDiversified Away100%
0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between InMode and Avita is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding InMode and Avita Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avita Medical and InMode 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 InMode 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 InMode i.e., InMode and Avita Medical go up and down completely randomly.

Pair Corralation between InMode and Avita Medical

Given the investment horizon of 90 days InMode is expected to under-perform the Avita Medical. But the stock apears to be less risky and, when comparing its historical volatility, InMode is 1.49 times less risky than Avita Medical. The stock trades about -0.03 of its potential returns per unit of risk. The Avita Medical is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  645.00  in Avita Medical on September 23, 2024 and sell it today you would earn a total of  532.00  from holding Avita Medical or generate 82.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

InMode  vs.  Avita Medical

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -1001020
JavaScript chart by amCharts 3.21.15INMD RCEL
       Timeline  
InMode 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in InMode are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, InMode is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec151617181920
Avita Medical 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Avita Medical are ranked lower than 5 (%) 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec1010.51111.51212.51313.514

InMode and Avita Medical Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.53-3.39-2.26-1.120.01.132.263.394.52 0.0350.0400.0450.050
JavaScript chart by amCharts 3.21.15INMD RCEL
       Returns  

Pair Trading with InMode and Avita Medical

The main advantage of trading using opposite InMode and Avita Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InMode 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 InMode 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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