Correlation Between EDAP TMS and Avita Medical

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

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

Diversification Opportunities for EDAP TMS and Avita Medical

-0.72

Correlation Coefficient

EDAP TMS  Avita Medical

Pay attention - limited upside

The 3 months correlation between EDAP and Avita is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding EDAP TMS SA and Avita Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avita Medical and EDAP TMS 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 EDAP TMS SA 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 EDAP TMS i.e., EDAP TMS and Avita Medical go up and down completely randomly.

Pair Corralation between EDAP TMS and Avita Medical

Given the investment horizon of 90 days EDAP TMS SA is expected to under-perform the Avita Medical. In addition to that, EDAP TMS is 1.26 times more volatile than Avita Medical. It trades about -0.08 of its total potential returns per unit of risk. Avita Medical is currently generating about 0.09 per unit of volatility. If you would invest  1,083  in Avita Medical on September 19, 2024 and sell it today you would earn a total of  169.00  from holding Avita Medical or generate 15.6% return on investment over 90 days.

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

EDAP TMS SA  vs.  Avita Medical

EDAP TMS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EDAP TMS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Avita Medical

Risk-Adjusted Performance

7 of 100

OK

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 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 EDAP TMS and Avita Medical

The main advantage of trading using opposite EDAP TMS and Avita Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDAP TMS 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 EDAP TMS SA 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.