Correlation Between AVITA Medical and SBM OFFSHORE

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

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

Diversification Opportunities for AVITA Medical and SBM OFFSHORE

0.47

Correlation Coefficient

AVITA Medical  SBM OFFSHORE

Very weak diversification

The 3 months correlation between AVITA and SBM is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding AVITA Medical and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE 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 SBM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM OFFSHORE has no effect on the direction of AVITA Medical i.e., AVITA Medical and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between AVITA Medical and SBM OFFSHORE

Assuming the 90 days trading horizon AVITA Medical is expected to under-perform the SBM OFFSHORE. In addition to that, AVITA Medical is 2.56 times more volatile than SBM OFFSHORE. It trades about -0.16 of its total potential returns per unit of risk. SBM OFFSHORE is currently generating about -0.23 per unit of volatility. If you would invest  1,776  in SBM OFFSHORE on September 24, 2024 and sell it today you would lose (109.00) from holding SBM OFFSHORE or give up 6.14% of portfolio value over 90 days.

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

AVITA Medical  vs.  SBM OFFSHORE

AVITA Medical

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AVITA Medical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, AVITA Medical reported solid returns over the last few months and may actually be approaching a breakup point.

SBM OFFSHORE

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, SBM OFFSHORE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AVITA Medical and SBM OFFSHORE

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

The idea behind AVITA Medical and SBM OFFSHORE 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.