Correlation Between Avita Medical and Integra LifeSciences

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

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

Diversification Opportunities for Avita Medical and Integra LifeSciences

0.86

Correlation Coefficient

Avita Medical  Integra LifeSciences

Very poor diversification

The 3 months correlation between Avita and Integra is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Avita Medical and Integra LifeSciences Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integra LifeSciences 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 Integra LifeSciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integra LifeSciences has no effect on the direction of Avita Medical i.e., Avita Medical and Integra LifeSciences go up and down completely randomly.

Pair Corralation between Avita Medical and Integra LifeSciences

Given the investment horizon of 90 days Avita Medical is expected to generate 1.63 times more return on investment than Integra LifeSciences. However, Avita Medical is 1.63 times more volatile than Integra LifeSciences Holdings. It trades about 0.05 of its potential returns per unit of risk. Integra LifeSciences Holdings is currently generating about -0.05 per unit of risk. If you would invest  659.00  in Avita Medical on September 19, 2024 and sell it today you would earn a total of  497.00  from holding Avita Medical or generate 75.42% 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.  Integra LifeSciences Holdings

Avita Medical

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avita Medical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Avita Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Integra LifeSciences

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Integra LifeSciences Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Integra LifeSciences unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avita Medical and Integra LifeSciences

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

The idea behind Avita Medical and Integra LifeSciences Holdings 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.