Correlation Between Bone Biologics and Avita Medical

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

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

Diversification Opportunities for Bone Biologics and Avita Medical

-0.71

Correlation Coefficient

Bone Biologics  Avita Medical

Pay attention - limited upside

The 3 months correlation between Bone and Avita is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bone Biologics Corp and Avita Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avita Medical and Bone Biologics 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 Bone Biologics Corp 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 Bone Biologics i.e., Bone Biologics and Avita Medical go up and down completely randomly.

Pair Corralation between Bone Biologics and Avita Medical

Given the investment horizon of 90 days Bone Biologics Corp is expected to under-perform the Avita Medical. In addition to that, Bone Biologics is 2.54 times more volatile than Avita Medical. It trades about -0.09 of its total potential returns per unit of risk. Avita Medical is currently generating about 0.07 per unit of volatility. If you would invest  1,056  in Avita Medical on September 21, 2024 and sell it today you would earn a total of  121.00  from holding Avita Medical or generate 11.46% return on investment over 90 days.

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

Bone Biologics Corp  vs.  Avita Medical

Bone Biologics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bone Biologics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Avita Medical

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avita Medical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Avita Medical disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bone Biologics and Avita Medical

The main advantage of trading using opposite Bone Biologics and Avita Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bone Biologics 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 Bone Biologics Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.