Correlation Between ReShape Lifesciences and Avita Medical

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

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

Diversification Opportunities for ReShape Lifesciences and Avita Medical

-0.28

Correlation Coefficient

ReShape Lifesciences  Avita Medical

Very good diversification

The 3 months correlation between ReShape and Avita is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding ReShape Lifesciences and Avita Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avita Medical and ReShape Lifesciences 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 ReShape Lifesciences 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 ReShape Lifesciences i.e., ReShape Lifesciences and Avita Medical go up and down completely randomly.

Pair Corralation between ReShape Lifesciences and Avita Medical

Given the investment horizon of 90 days ReShape Lifesciences is expected to under-perform the Avita Medical. In addition to that, ReShape Lifesciences is 1.86 times more volatile than Avita Medical. It trades about -0.13 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 22, 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	Insignificant
Accuracy	98.46%
Values	Daily Returns

ReShape Lifesciences  vs.  Avita Medical

ReShape Lifesciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ReShape Lifesciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Avita Medical

Risk-Adjusted Performance

5 of 100

Modest

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 ReShape Lifesciences and Avita Medical

The main advantage of trading using opposite ReShape Lifesciences and Avita Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ReShape Lifesciences 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 ReShape Lifesciences 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.