Correlation Between Profound Medical and CVW CleanTech

Can any of the company-specific risk be diversified away by investing in both Profound Medical and CVW CleanTech 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 CVW CleanTech 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 CVW CleanTech, you can compare the effects of market volatilities on Profound Medical and CVW CleanTech 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 CVW CleanTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profound Medical and CVW CleanTech.

Diversification Opportunities for Profound Medical and CVW CleanTech

0.28

Correlation Coefficient

Profound Medical  CVW CleanTech

Modest diversification

The 3 months correlation between Profound and CVW is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Profound Medical Corp and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech 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 CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of Profound Medical i.e., Profound Medical and CVW CleanTech go up and down completely randomly.

Pair Corralation between Profound Medical and CVW CleanTech

Assuming the 90 days trading horizon Profound Medical Corp is expected to under-perform the CVW CleanTech. But the stock apears to be less risky and, when comparing its historical volatility, Profound Medical Corp is 1.25 times less risky than CVW CleanTech. The stock trades about 0.0 of its potential returns per unit of risk. The CVW CleanTech is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  116.00  in CVW CleanTech on September 23, 2024 and sell it today you would lose (30.00) from holding CVW CleanTech or give up 25.86% of portfolio value over 90 days.

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

Profound Medical Corp  vs.  CVW CleanTech

Profound Medical Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Profound Medical Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Profound Medical is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

CVW CleanTech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVW CleanTech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CVW CleanTech is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Profound Medical and CVW CleanTech

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

The idea behind Profound Medical Corp and CVW CleanTech 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.