Correlation Between Transport International and AVITA Medical

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

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

Diversification Opportunities for Transport International and AVITA Medical

0.23

Correlation Coefficient

Transport International  AVITA Medical

Modest diversification

The 3 months correlation between Transport and AVITA is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin and AVITA Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVITA Medical and Transport International 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 Transport International 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 Transport International i.e., Transport International and AVITA Medical go up and down completely randomly.

Pair Corralation between Transport International and AVITA Medical

Assuming the 90 days horizon Transport International Holdings is expected to generate 0.38 times more return on investment than AVITA Medical. However, Transport International Holdings is 2.63 times less risky than AVITA Medical. It trades about 0.01 of its potential returns per unit of risk. AVITA Medical is currently generating about -0.06 per unit of risk. If you would invest  94.00  in Transport International Holdings on December 22, 2024 and sell it today you would earn a total of  0.00  from holding Transport International Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Transport International Holdin  vs.  AVITA Medical

Transport International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transport International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Transport International is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Transport International and AVITA Medical

The main advantage of trading using opposite Transport International and AVITA Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport International 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 Transport International 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .