Correlation Between Treace Medical and Avita Medical

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

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

Diversification Opportunities for Treace Medical and Avita Medical

-0.54

Correlation Coefficient

Treace Medical  Avita Medical

Excellent diversification

The 3 months correlation between Treace and Avita is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Treace Medical Concepts and Avita Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avita Medical and Treace 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 Treace Medical Concepts 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 Treace Medical i.e., Treace Medical and Avita Medical go up and down completely randomly.

Pair Corralation between Treace Medical and Avita Medical

Given the investment horizon of 90 days Treace Medical Concepts is expected to generate 0.63 times more return on investment than Avita Medical. However, Treace Medical Concepts is 1.58 times less risky than Avita Medical. It trades about 0.09 of its potential returns per unit of risk. Avita Medical is currently generating about -0.06 per unit of risk. If you would invest  698.00  in Treace Medical Concepts on December 27, 2024 and sell it today you would earn a total of  139.00  from holding Treace Medical Concepts or generate 19.91% return on investment over 90 days.

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

Treace Medical Concepts  vs.  Avita Medical

Treace Medical Concepts

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Treace Medical Concepts are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Treace Medical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Treace Medical and Avita Medical

The main advantage of trading using opposite Treace Medical and Avita Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treace Medical 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 Treace Medical Concepts 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.