Correlation Between Avita Medical and CVRx

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

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

Diversification Opportunities for Avita Medical and CVRx

0.82

Correlation Coefficient

Avita Medical  CVRx

Very poor diversification

The 3 months correlation between Avita and CVRx is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Avita Medical and CVRx Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVRx Inc 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 CVRx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVRx Inc has no effect on the direction of Avita Medical i.e., Avita Medical and CVRx go up and down completely randomly.

Pair Corralation between Avita Medical and CVRx

Given the investment horizon of 90 days Avita Medical is expected to generate 0.82 times more return on investment than CVRx. However, Avita Medical is 1.22 times less risky than CVRx. It trades about 0.03 of its potential returns per unit of risk. CVRx Inc is currently generating about -0.01 per unit of risk. If you would invest  1,243  in Avita Medical on September 17, 2024 and sell it today you would earn a total of  10.00  from holding Avita Medical or generate 0.8% return on investment over 90 days.

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

Avita Medical  vs.  CVRx Inc

Avita Medical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avita Medical are ranked lower than 9 (%) 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.

CVRx Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CVRx Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CVRx showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avita Medical and CVRx

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

The idea behind Avita Medical and CVRx Inc 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.