Correlation Between Profound Medical and Precision Drilling

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

Diversification Opportunities for Profound Medical and Precision Drilling

0.59

Correlation Coefficient

Profound Medical  Precision Drilling

Very weak diversification

The 3 months correlation between Profound and Precision is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Profound Medical Corp and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling 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 Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of Profound Medical i.e., Profound Medical and Precision Drilling go up and down completely randomly.

Pair Corralation between Profound Medical and Precision Drilling

Assuming the 90 days trading horizon Profound Medical is expected to generate 4.99 times less return on investment than Precision Drilling. In addition to that, Profound Medical is 1.59 times more volatile than Precision Drilling. It trades about 0.01 of its total potential returns per unit of risk. Precision Drilling is currently generating about 0.04 per unit of volatility. 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

Profound Medical Corp  vs.  Precision Drilling

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.

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.

Pair Trading with Profound Medical and Precision Drilling

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

The idea behind Profound Medical Corp and Precision Drilling 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.