Correlation Between Avita Medical and Heartbeam Warrant

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

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

Diversification Opportunities for Avita Medical and Heartbeam Warrant

0.71

Correlation Coefficient

Avita Medical  Heartbeam Warrant

Poor diversification

The 3 months correlation between Avita and Heartbeam is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Avita Medical and Heartbeam Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartbeam Warrant 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 Heartbeam Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartbeam Warrant has no effect on the direction of Avita Medical i.e., Avita Medical and Heartbeam Warrant go up and down completely randomly.

Pair Corralation between Avita Medical and Heartbeam Warrant

Given the investment horizon of 90 days Avita Medical is expected to generate 4.22 times less return on investment than Heartbeam Warrant. But when comparing it to its historical volatility, Avita Medical is 2.73 times less risky than Heartbeam Warrant. It trades about 0.09 of its potential returns per unit of risk. Heartbeam Warrant is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  50.00  in Heartbeam Warrant on September 19, 2024 and sell it today you would earn a total of  32.00  from holding Heartbeam Warrant or generate 64.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.06%
Values	Daily Returns

Avita Medical  vs.  Heartbeam Warrant

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.

Heartbeam Warrant

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heartbeam Warrant are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Heartbeam Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avita Medical and Heartbeam Warrant

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

The idea behind Avita Medical and Heartbeam Warrant 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.