Correlation Between Avita Medical and Electrocore LLC

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

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

Diversification Opportunities for Avita Medical and Electrocore LLC

0.69

Correlation Coefficient

Avita Medical  Electrocore LLC

Poor diversification

The 3 months correlation between Avita and Electrocore is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Avita Medical and Electrocore LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electrocore LLC 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 Electrocore LLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electrocore LLC has no effect on the direction of Avita Medical i.e., Avita Medical and Electrocore LLC go up and down completely randomly.

Pair Corralation between Avita Medical and Electrocore LLC

Given the investment horizon of 90 days Avita Medical is expected to generate 2.56 times less return on investment than Electrocore LLC. In addition to that, Avita Medical is 1.08 times more volatile than Electrocore LLC. It trades about 0.04 of its total potential returns per unit of risk. Electrocore LLC is currently generating about 0.11 per unit of volatility. If you would invest  548.00  in Electrocore LLC on September 17, 2024 and sell it today you would earn a total of  915.00  from holding Electrocore LLC or generate 166.97% return on investment over 90 days.

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

Avita Medical  vs.  Electrocore LLC

Avita Medical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avita Medical are ranked lower than 8 (%) 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.

Electrocore LLC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electrocore LLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Electrocore LLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avita Medical and Electrocore LLC

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

The idea behind Avita Medical and Electrocore LLC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.