Correlation Between Zimmer Biomet and Avita Medical
Can any of the company-specific risk be diversified away by investing in both Zimmer Biomet 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 Zimmer Biomet and Avita Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zimmer Biomet Holdings and Avita Medical, you can compare the effects of market volatilities on Zimmer Biomet 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 Zimmer Biomet with a short position of Avita Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zimmer Biomet and Avita Medical.
Diversification Opportunities for Zimmer Biomet and Avita Medical
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Zimmer and Avita is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Zimmer Biomet Holdings and Avita Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avita Medical and Zimmer Biomet 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 Zimmer Biomet Holdings 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 Zimmer Biomet i.e., Zimmer Biomet and Avita Medical go up and down completely randomly.
Pair Corralation between Zimmer Biomet and Avita Medical
Considering the 90-day investment horizon Zimmer Biomet Holdings is expected to generate 0.29 times more return on investment than Avita Medical. However, Zimmer Biomet Holdings is 3.46 times less risky than Avita Medical. It trades about 0.0 of its potential returns per unit of risk. Avita Medical is currently generating about -0.2 per unit of risk. If you would invest 12,146 in Zimmer Biomet Holdings on January 26, 2024 and sell it today you would lose (29.00) from holding Zimmer Biomet Holdings or give up 0.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zimmer Biomet Holdings vs. Avita Medical
Performance |
| Timeline |
| Zimmer Biomet Holdings |
| Avita Medical |
Zimmer Biomet and Avita Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zimmer Biomet and Avita Medical
The main advantage of trading using opposite Zimmer Biomet and Avita Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zimmer Biomet 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 Zimmer Biomet Holdings 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.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 CEOs Directory module to screen CEOs from public companies around the world.
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