Correlation Between Avita Medical and Bioventus

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

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

Diversification Opportunities for Avita Medical and Bioventus

-0.35

Correlation Coefficient

Avita Medical  Bioventus

Very good diversification

The 3 months correlation between Avita and Bioventus is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Avita Medical and Bioventus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bioventus 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 Bioventus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bioventus has no effect on the direction of Avita Medical i.e., Avita Medical and Bioventus go up and down completely randomly.

Pair Corralation between Avita Medical and Bioventus

Given the investment horizon of 90 days Avita Medical is expected to generate 0.82 times more return on investment than Bioventus. However, Avita Medical is 1.21 times less risky than Bioventus. It trades about 0.15 of its potential returns per unit of risk. Bioventus is currently generating about -0.05 per unit of risk. If you would invest  1,047  in Avita Medical on September 17, 2024 and sell it today you would earn a total of  206.00  from holding Avita Medical or generate 19.68% return on investment over 90 days.

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

Avita Medical  vs.  Bioventus

Avita Medical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avita Medical are ranked lower than 9 (%) 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.

Bioventus

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Bioventus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bioventus is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Avita Medical and Bioventus

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

The idea behind Avita Medical and Bioventus 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.