Correlation Between Profound Medical and Canaf Investments

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

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

Diversification Opportunities for Profound Medical and Canaf Investments

0.08

Correlation Coefficient

Profound Medical  Canaf Investments

Significant diversification

The 3 months correlation between Profound and Canaf is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Profound Medical Corp and Canaf Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaf Investments and Profound Medical 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 Profound Medical Corp are associated (or correlated) with Canaf Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canaf Investments has no effect on the direction of Profound Medical i.e., Profound Medical and Canaf Investments go up and down completely randomly.

Pair Corralation between Profound Medical and Canaf Investments

Assuming the 90 days trading horizon Profound Medical is expected to generate 6.9 times less return on investment than Canaf Investments. But when comparing it to its historical volatility, Profound Medical Corp is 1.43 times less risky than Canaf Investments. It trades about 0.01 of its potential returns per unit of risk. Canaf Investments is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Canaf Investments on September 3, 2024 and sell it today you would earn a total of  2.00  from holding Canaf Investments or generate 7.41% return on investment over 90 days.

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

Profound Medical Corp  vs.  Canaf Investments

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. In spite of very healthy basic indicators, Profound Medical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Canaf Investments

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canaf Investments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Canaf Investments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Profound Medical and Canaf Investments

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

The idea behind Profound Medical Corp and Canaf Investments 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.