Correlation Between LivaNova PLC and Avita Medical

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

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

Diversification Opportunities for LivaNova PLC and Avita Medical

0.27

Correlation Coefficient

LivaNova PLC  Avita Medical

Modest diversification

The 3 months correlation between LivaNova and Avita is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding LivaNova PLC and Avita Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avita Medical and LivaNova PLC 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 LivaNova PLC 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 LivaNova PLC i.e., LivaNova PLC and Avita Medical go up and down completely randomly.

Pair Corralation between LivaNova PLC and Avita Medical

Given the investment horizon of 90 days LivaNova PLC is expected to generate 0.45 times more return on investment than Avita Medical. However, LivaNova PLC is 2.22 times less risky than Avita Medical. It trades about -0.07 of its potential returns per unit of risk. Avita Medical is currently generating about -0.07 per unit of risk. If you would invest  4,570  in LivaNova PLC on December 28, 2024 and sell it today you would lose (580.00) from holding LivaNova PLC or give up 12.69% of portfolio value over 90 days.

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

LivaNova PLC  vs.  Avita Medical

LivaNova PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days LivaNova PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm 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 LivaNova PLC and Avita Medical

The main advantage of trading using opposite LivaNova PLC and Avita Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LivaNova PLC 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 LivaNova PLC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.