Correlation Between Profound Medical and ReWalk Robotics

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

Diversification Opportunities for Profound Medical and ReWalk Robotics

0.22

Correlation Coefficient

Profound Medical  ReWalk Robotics

Modest diversification

The 3 months correlation between Profound and ReWalk is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Profound Medical Corp and ReWalk Robotics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReWalk Robotics 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 ReWalk Robotics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReWalk Robotics has no effect on the direction of Profound Medical i.e., Profound Medical and ReWalk Robotics go up and down completely randomly.

Pair Corralation between Profound Medical and ReWalk Robotics

Given the investment horizon of 90 days Profound Medical Corp is expected to generate 0.78 times more return on investment than ReWalk Robotics. However, Profound Medical Corp is 1.28 times less risky than ReWalk Robotics. It trades about -0.02 of its potential returns per unit of risk. ReWalk Robotics is currently generating about -0.16 per unit of risk. If you would invest  868.00  in Profound Medical Corp on September 2, 2024 and sell it today you would lose (56.00) from holding Profound Medical Corp or give up 6.45% 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.  ReWalk Robotics

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. Despite nearly stable basic indicators, Profound Medical is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

ReWalk Robotics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Profound Medical and ReWalk Robotics

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

The idea behind Profound Medical Corp and ReWalk Robotics 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.