Correlation Between Cutera and Avanos Medical
Can any of the company-specific risk be diversified away by investing in both Cutera and Avanos 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 Cutera and Avanos Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cutera Inc and Avanos Medical, you can compare the effects of market volatilities on Cutera and Avanos 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 Cutera with a short position of Avanos Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cutera and Avanos Medical.
Diversification Opportunities for Cutera and Avanos Medical
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cutera and Avanos is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Cutera Inc and Avanos Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanos Medical and Cutera 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 Cutera Inc are associated (or correlated) with Avanos Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanos Medical has no effect on the direction of Cutera i.e., Cutera and Avanos Medical go up and down completely randomly.
Pair Corralation between Cutera and Avanos Medical
Given the investment horizon of 90 days Cutera Inc is expected to under-perform the Avanos Medical. In addition to that, Cutera is 2.21 times more volatile than Avanos Medical. It trades about -0.17 of its total potential returns per unit of risk. Avanos Medical is currently generating about -0.11 per unit of volatility. If you would invest 2,410 in Avanos Medical on August 28, 2024 and sell it today you would lose (473.00) from holding Avanos Medical or give up 19.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cutera Inc vs. Avanos Medical
Performance |
| Timeline |
| Cutera Inc |
| Avanos Medical |
Cutera and Avanos Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cutera and Avanos Medical
The main advantage of trading using opposite Cutera and Avanos Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cutera position performs unexpectedly, Avanos 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 Avanos Medical will offset losses from the drop in Avanos Medical's long position.The idea behind Cutera Inc and Avanos 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.| Avanos Medical vs. Artivion | Avanos Medical vs. Anika Therapeutics | Avanos Medical vs. Sight Sciences | Avanos Medical vs. Orthofix Medical |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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