Correlation Between Avita Medical and Heartbeam Warrant

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

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

Diversification Opportunities for Avita Medical and Heartbeam Warrant

0.61

Correlation Coefficient

Avita Medical  Heartbeam Warrant

Poor diversification

The 3 months correlation between Avita and Heartbeam is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Avita Medical and Heartbeam Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartbeam Warrant and Avita Medical 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 Avita Medical are associated (or correlated) with Heartbeam Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartbeam Warrant has no effect on the direction of Avita Medical i.e., Avita Medical and Heartbeam Warrant go up and down completely randomly.

Pair Corralation between Avita Medical and Heartbeam Warrant

Given the investment horizon of 90 days Avita Medical is expected to under-perform the Heartbeam Warrant. But the stock apears to be less risky and, when comparing its historical volatility, Avita Medical is 1.44 times less risky than Heartbeam Warrant. The stock trades about -0.07 of its potential returns per unit of risk. The Heartbeam Warrant is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  65.00  in Heartbeam Warrant on December 28, 2024 and sell it today you would lose (13.99) from holding Heartbeam Warrant or give up 21.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.8%
Values	Daily Returns

Avita Medical  vs.  Heartbeam Warrant

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.

Heartbeam Warrant

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heartbeam Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Heartbeam Warrant is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Avita Medical and Heartbeam Warrant

The main advantage of trading using opposite Avita Medical and Heartbeam Warrant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avita Medical position performs unexpectedly, Heartbeam Warrant 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 Heartbeam Warrant will offset losses from the drop in Heartbeam Warrant's long position.

The idea behind Avita Medical and Heartbeam Warrant 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.