Correlation Between USU Software and AVITA Medical

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

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

Diversification Opportunities for USU Software and AVITA Medical

0.31

Correlation Coefficient

USU Software  AVITA Medical

Weak diversification

The 3 months correlation between USU and AVITA is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding USU Software AG and AVITA Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVITA Medical and USU Software 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 USU Software AG 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 USU Software i.e., USU Software and AVITA Medical go up and down completely randomly.

Pair Corralation between USU Software and AVITA Medical

Assuming the 90 days trading horizon USU Software AG is expected to generate 0.42 times more return on investment than AVITA Medical. However, USU Software AG is 2.41 times less risky than AVITA Medical. It trades about 0.05 of its potential returns per unit of risk. AVITA Medical is currently generating about -0.03 per unit of risk. If you would invest  1,790  in USU Software AG on October 24, 2024 and sell it today you would earn a total of  390.00  from holding USU Software AG or generate 21.79% return on investment over 90 days.

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

USU Software AG  vs.  AVITA Medical

USU Software AG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in USU Software AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, USU Software is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AVITA Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with USU Software and AVITA Medical

The main advantage of trading using opposite USU Software and AVITA Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USU Software 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 USU Software AG 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.