Correlation Between Profound Medical and Brainsway

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

Diversification Opportunities for Profound Medical and Brainsway

-0.42

Correlation Coefficient

Profound Medical  Brainsway

Very good diversification

The 3 months correlation between Profound and Brainsway is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Profound Medical Corp and Brainsway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brainsway 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 Brainsway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brainsway has no effect on the direction of Profound Medical i.e., Profound Medical and Brainsway go up and down completely randomly.

Pair Corralation between Profound Medical and Brainsway

Given the investment horizon of 90 days Profound Medical Corp is expected to under-perform the Brainsway. But the stock apears to be less risky and, when comparing its historical volatility, Profound Medical Corp is 1.04 times less risky than Brainsway. The stock trades about -0.08 of its potential returns per unit of risk. The Brainsway is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  991.00  in Brainsway on December 1, 2024 and sell it today you would lose (36.00) from holding Brainsway or give up 3.63% of portfolio value over 90 days.

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

Profound Medical Corp  vs.  Brainsway

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. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Brainsway

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brainsway has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Brainsway is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Profound Medical and Brainsway

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

The idea behind Profound Medical Corp and Brainsway 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.