Correlation Between Trinity Biotech and Avita Medical

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

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

Diversification Opportunities for Trinity Biotech and Avita Medical

0.36

Correlation Coefficient

Trinity Biotech  Avita Medical

Weak diversification

The 3 months correlation between Trinity and Avita is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Trinity Biotech plc and Avita Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avita Medical and Trinity Biotech 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 Trinity Biotech plc 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 Trinity Biotech i.e., Trinity Biotech and Avita Medical go up and down completely randomly.

Pair Corralation between Trinity Biotech and Avita Medical

Given the investment horizon of 90 days Trinity Biotech plc is expected to generate 1.87 times more return on investment than Avita Medical. However, Trinity Biotech is 1.87 times more volatile than Avita Medical. It trades about 0.0 of its potential returns per unit of risk. Avita Medical is currently generating about -0.07 per unit of risk. If you would invest  89.00  in Trinity Biotech plc on December 28, 2024 and sell it today you would lose (22.00) from holding Trinity Biotech plc or give up 24.72% of portfolio value over 90 days.

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

Trinity Biotech plc  vs.  Avita Medical

Trinity Biotech plc

Risk-Adjusted Performance

Weak

Over the last 90 days Trinity Biotech plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Trinity Biotech is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 Trinity Biotech and Avita Medical

The main advantage of trading using opposite Trinity Biotech and Avita Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trinity Biotech 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 Trinity Biotech plc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.