Correlation Between Profound Medical and Rathdowney Resources

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

Diversification Opportunities for Profound Medical and Rathdowney Resources

-0.44

Correlation Coefficient

Profound Medical  Rathdowney Resources

Very good diversification

The 3 months correlation between Profound and Rathdowney is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Profound Medical Corp and Rathdowney Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rathdowney Resources 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 Rathdowney Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rathdowney Resources has no effect on the direction of Profound Medical i.e., Profound Medical and Rathdowney Resources go up and down completely randomly.

Pair Corralation between Profound Medical and Rathdowney Resources

Assuming the 90 days trading horizon Profound Medical Corp is expected to under-perform the Rathdowney Resources. But the stock apears to be less risky and, when comparing its historical volatility, Profound Medical Corp is 4.05 times less risky than Rathdowney Resources. The stock trades about -0.06 of its potential returns per unit of risk. The Rathdowney Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Rathdowney Resources on December 29, 2024 and sell it today you would earn a total of  1.00  from holding Rathdowney Resources or generate 50.0% return on investment over 90 days.

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

Profound Medical Corp  vs.  Rathdowney Resources

Profound Medical Corp

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Rathdowney Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rathdowney Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Rathdowney Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Profound Medical and Rathdowney Resources

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

The idea behind Profound Medical Corp and Rathdowney Resources 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..