Correlation Between Birchtech Corp and Profound Medical

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

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

Diversification Opportunities for Birchtech Corp and Profound Medical

0.6

Correlation Coefficient

Birchtech Corp  Profound Medical

Poor diversification

The 3 months correlation between Birchtech and Profound is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Birchtech Corp and Profound Medical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profound Medical Corp and Birchtech Corp 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 Birchtech Corp are associated (or correlated) with Profound Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profound Medical Corp has no effect on the direction of Birchtech Corp i.e., Birchtech Corp and Profound Medical go up and down completely randomly.

Pair Corralation between Birchtech Corp and Profound Medical

Assuming the 90 days trading horizon Birchtech Corp is expected to under-perform the Profound Medical. In addition to that, Birchtech Corp is 1.44 times more volatile than Profound Medical Corp. It trades about -0.09 of its total potential returns per unit of risk. Profound Medical Corp is currently generating about 0.05 per unit of volatility. If you would invest  1,028  in Profound Medical Corp on October 10, 2024 and sell it today you would earn a total of  81.00  from holding Profound Medical Corp or generate 7.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	68.85%
Values	Daily Returns

Birchtech Corp  vs.  Profound Medical Corp

Birchtech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Birchtech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Profound Medical Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Profound Medical Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Profound Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Birchtech Corp and Profound Medical

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

The idea behind Birchtech Corp and Profound Medical Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.