Correlation Between Precision Drilling and Profound Medical

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

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

Diversification Opportunities for Precision Drilling and Profound Medical

0.59

Correlation Coefficient

Precision Drilling  Profound Medical

Very weak diversification

The 3 months correlation between Precision and Profound is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Precision Drilling 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 Precision Drilling 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 Precision Drilling 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 Precision Drilling i.e., Precision Drilling and Profound Medical go up and down completely randomly.

Pair Corralation between Precision Drilling and Profound Medical

Assuming the 90 days horizon Precision Drilling is expected to generate 0.63 times more return on investment than Profound Medical. However, Precision Drilling is 1.59 times less risky than Profound Medical. It trades about 0.04 of its potential returns per unit of risk. Profound Medical Corp is currently generating about 0.01 per unit of risk. If you would invest  6,488  in Precision Drilling on October 5, 2024 and sell it today you would earn a total of  2,594  from holding Precision Drilling or generate 39.98% return on investment over 90 days.

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

Precision Drilling  vs.  Profound Medical Corp

Precision Drilling

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Precision Drilling is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Profound Medical Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Profound Medical Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Profound Medical displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Precision Drilling and Profound Medical

The main advantage of trading using opposite Precision Drilling and Profound Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision Drilling 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 Precision Drilling 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.