Correlation Between SCOTT TECHNOLOGY and AVITA Medical

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

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

Diversification Opportunities for SCOTT TECHNOLOGY and AVITA Medical

0.38

Correlation Coefficient

SCOTT TECHNOLOGY  AVITA Medical

Weak diversification

The 3 months correlation between SCOTT and AVITA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding SCOTT TECHNOLOGY and AVITA Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVITA Medical and SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY i.e., SCOTT TECHNOLOGY and AVITA Medical go up and down completely randomly.

Pair Corralation between SCOTT TECHNOLOGY and AVITA Medical

Assuming the 90 days trading horizon SCOTT TECHNOLOGY is expected to generate 0.4 times more return on investment than AVITA Medical. However, SCOTT TECHNOLOGY is 2.48 times less risky than AVITA Medical. It trades about -0.16 of its potential returns per unit of risk. AVITA Medical is currently generating about -0.07 per unit of risk. If you would invest  136.00  in SCOTT TECHNOLOGY on November 29, 2024 and sell it today you would lose (26.00) from holding SCOTT TECHNOLOGY or give up 19.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

SCOTT TECHNOLOGY  vs.  AVITA Medical

SCOTT TECHNOLOGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days SCOTT TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SCOTT TECHNOLOGY and AVITA Medical

The main advantage of trading using opposite SCOTT TECHNOLOGY and AVITA Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.