Correlation Between Profound Medical and UPS CDR

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

Diversification Opportunities for Profound Medical and UPS CDR

0.24

Correlation Coefficient

Profound Medical  UPS CDR

Modest diversification

The 3 months correlation between Profound and UPS is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Profound Medical Corp and UPS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPS CDR 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 UPS CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPS CDR has no effect on the direction of Profound Medical i.e., Profound Medical and UPS CDR go up and down completely randomly.

Pair Corralation between Profound Medical and UPS CDR

Assuming the 90 days trading horizon Profound Medical Corp is expected to generate 1.51 times more return on investment than UPS CDR. However, Profound Medical is 1.51 times more volatile than UPS CDR. It trades about -0.13 of its potential returns per unit of risk. UPS CDR is currently generating about -0.23 per unit of risk. If you would invest  1,107  in Profound Medical Corp on September 19, 2024 and sell it today you would lose (79.00) from holding Profound Medical Corp or give up 7.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Profound Medical Corp  vs.  UPS CDR

Profound Medical Corp

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, Profound Medical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

UPS CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UPS CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, UPS CDR 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 UPS CDR

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

The idea behind Profound Medical Corp and UPS CDR 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.