Correlation Between Profound Medical and Signature Resources

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

Diversification Opportunities for Profound Medical and Signature Resources

0.08

Correlation Coefficient

Profound Medical  Signature Resources

Significant diversification

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

Pair Corralation between Profound Medical and Signature Resources

Assuming the 90 days trading horizon Profound Medical is expected to generate 5.28 times less return on investment than Signature Resources. But when comparing it to its historical volatility, Profound Medical Corp is 3.78 times less risky than Signature Resources. It trades about 0.03 of its potential returns per unit of risk. Signature Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Signature Resources on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Signature Resources or generate 0.0% 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.  Signature Resources

Profound Medical Corp

Risk-Adjusted Performance

3 of 100

Insignificant

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

Signature Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Signature Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Profound Medical and Signature Resources

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

The idea behind Profound Medical Corp and Signature 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.