Correlation Between Avita Medical and ICU Medical

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

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

Diversification Opportunities for Avita Medical and ICU Medical

-0.66

Correlation Coefficient

Avita Medical  ICU Medical

Excellent diversification

The 3 months correlation between Avita and ICU is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Avita Medical and ICU Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICU Medical 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 ICU Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICU Medical has no effect on the direction of Avita Medical i.e., Avita Medical and ICU Medical go up and down completely randomly.

Pair Corralation between Avita Medical and ICU Medical

Given the investment horizon of 90 days Avita Medical is expected to generate 1.55 times more return on investment than ICU Medical. However, Avita Medical is 1.55 times more volatile than ICU Medical. It trades about 0.16 of its potential returns per unit of risk. ICU Medical is currently generating about -0.06 per unit of risk. If you would invest  1,026  in Avita Medical on September 13, 2024 and sell it today you would earn a total of  297.00  from holding Avita Medical or generate 28.95% return on investment over 90 days.

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

Avita Medical  vs.  ICU Medical

Avita Medical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avita Medical are ranked lower than 12 (%) 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.

ICU Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICU Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Avita Medical and ICU Medical

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

The idea behind Avita Medical and ICU 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.