Correlation Between Profound Medical and Tela Bio

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

Diversification Opportunities for Profound Medical and Tela Bio

0.23

Correlation Coefficient

Profound Medical  Tela Bio

Modest diversification

The 3 months correlation between Profound and Tela is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Profound Medical Corp and Tela Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tela Bio 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 Tela Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tela Bio has no effect on the direction of Profound Medical i.e., Profound Medical and Tela Bio go up and down completely randomly.

Pair Corralation between Profound Medical and Tela Bio

Given the investment horizon of 90 days Profound Medical Corp is expected to generate 0.62 times more return on investment than Tela Bio. However, Profound Medical Corp is 1.62 times less risky than Tela Bio. It trades about -0.11 of its potential returns per unit of risk. Tela Bio is currently generating about -0.21 per unit of risk. If you would invest  705.00  in Profound Medical Corp on December 28, 2024 and sell it today you would lose (173.00) from holding Profound Medical Corp or give up 24.54% 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.  Tela Bio

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.

Tela Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tela Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Profound Medical and Tela Bio

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

The idea behind Profound Medical Corp and Tela Bio 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.