Correlation Between Profound Medical and Stampede Drilling

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

Diversification Opportunities for Profound Medical and Stampede Drilling

-0.08

Correlation Coefficient

Profound Medical  Stampede Drilling

Good diversification

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

Pair Corralation between Profound Medical and Stampede Drilling

Assuming the 90 days trading horizon Profound Medical Corp is expected to generate 1.1 times more return on investment than Stampede Drilling. However, Profound Medical is 1.1 times more volatile than Stampede Drilling. It trades about 0.01 of its potential returns per unit of risk. Stampede Drilling is currently generating about -0.01 per unit of risk. If you would invest  1,416  in Profound Medical Corp on October 5, 2024 and sell it today you would lose (273.00) from holding Profound Medical Corp or give up 19.28% of portfolio value over 90 days.

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

Profound Medical Corp  vs.  Stampede 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.

Stampede Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stampede Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Profound Medical and Stampede Drilling

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

The idea behind Profound Medical Corp and Stampede 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.