Correlation Between Penumbra and Profound Medical

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

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

Diversification Opportunities for Penumbra and Profound Medical

0.1

Correlation Coefficient

Penumbra  Profound Medical

Average diversification

The 3 months correlation between Penumbra and Profound is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Penumbra 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 Penumbra 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 Penumbra 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 Penumbra i.e., Penumbra and Profound Medical go up and down completely randomly.

Pair Corralation between Penumbra and Profound Medical

Considering the 90-day investment horizon Penumbra is expected to generate 2.52 times less return on investment than Profound Medical. But when comparing it to its historical volatility, Penumbra is 3.33 times less risky than Profound Medical. It trades about 0.17 of its potential returns per unit of risk. Profound Medical Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  735.00  in Profound Medical Corp on September 2, 2024 and sell it today you would earn a total of  77.00  from holding Profound Medical Corp or generate 10.48% return on investment over 90 days.

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

Penumbra  vs.  Profound Medical Corp

Penumbra

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Penumbra are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Penumbra displayed solid returns over the last few months and may actually be approaching a breakup point.

Profound Medical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Profound Medical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Profound Medical is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Penumbra and Profound Medical

The main advantage of trading using opposite Penumbra and Profound Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penumbra 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 Penumbra 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.