Correlation Between Boston Scientific and Avita Medical

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Can any of the company-specific risk be diversified away by investing in both Boston Scientific 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 Boston Scientific and Avita Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boston Scientific Corp and Avita Medical, you can compare the effects of market volatilities on Boston Scientific 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 Boston Scientific with a short position of Avita Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Scientific and Avita Medical.

Diversification Opportunities for Boston Scientific and Avita Medical

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Boston and Avita is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Boston Scientific Corp and Avita Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avita Medical and Boston Scientific 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 Boston Scientific Corp 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 Boston Scientific i.e., Boston Scientific and Avita Medical go up and down completely randomly.

Pair Corralation between Boston Scientific and Avita Medical

Considering the 90-day investment horizon Boston Scientific Corp is expected to generate 0.39 times more return on investment than Avita Medical. However, Boston Scientific Corp is 2.58 times less risky than Avita Medical. It trades about 0.1 of its potential returns per unit of risk. Avita Medical is currently generating about -0.07 per unit of risk. If you would invest  6,699  in Boston Scientific Corp on December 30, 2023 and sell it today you would earn a total of  150.00  from holding Boston Scientific Corp or generate 2.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Boston Scientific Corp  vs.  Avita Medical

 Performance 
       Timeline  
Boston Scientific Corp 

Risk-Adjusted Performance

22 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Boston Scientific showed solid returns over the last few months and may actually be approaching a breakup point.
Avita Medical 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
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 conflicting technical and fundamental indicators, Avita Medical disclosed solid returns over the last few months and may actually be approaching a breakup point.

Boston Scientific and Avita Medical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Boston Scientific and Avita Medical

The main advantage of trading using opposite Boston Scientific and Avita Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Scientific 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 Boston Scientific Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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