Correlation Between Profound Medical and Embecta Corp

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

Diversification Opportunities for Profound Medical and Embecta Corp

0.26

Correlation Coefficient

Profound Medical  Embecta Corp

Modest diversification

The 3 months correlation between Profound and Embecta is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Profound Medical Corp and Embecta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embecta Corp 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 Embecta Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embecta Corp has no effect on the direction of Profound Medical i.e., Profound Medical and Embecta Corp go up and down completely randomly.

Pair Corralation between Profound Medical and Embecta Corp

Given the investment horizon of 90 days Profound Medical Corp is expected to generate 0.94 times more return on investment than Embecta Corp. However, Profound Medical Corp is 1.07 times less risky than Embecta Corp. It trades about -0.08 of its potential returns per unit of risk. Embecta Corp is currently generating about -0.26 per unit of risk. If you would invest  705.00  in Profound Medical Corp on December 29, 2024 and sell it today you would lose (100.00) from holding Profound Medical Corp or give up 14.18% of portfolio value over 90 days.

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

Profound Medical Corp  vs.  Embecta Corp

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.

Embecta Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Embecta Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Profound Medical and Embecta Corp

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

The idea behind Profound Medical Corp and Embecta Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.