Correlation Between Transition Metals and Profound Medical

Can any of the company-specific risk be diversified away by investing in both Transition Metals and Profound Medical 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 Transition Metals and Profound Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transition Metals Corp and Profound Medical Corp, you can compare the effects of market volatilities on Transition Metals and Profound Medical 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 Transition Metals with a short position of Profound Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transition Metals and Profound Medical.

Diversification Opportunities for Transition Metals and Profound Medical

-0.08

Correlation Coefficient

Transition Metals  Profound Medical

Good diversification

The 3 months correlation between Transition and Profound is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Transition Metals Corp and Profound Medical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profound Medical Corp and Transition Metals 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 Transition Metals Corp are associated (or correlated) with Profound Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profound Medical Corp has no effect on the direction of Transition Metals i.e., Transition Metals and Profound Medical go up and down completely randomly.

Pair Corralation between Transition Metals and Profound Medical

Assuming the 90 days horizon Transition Metals Corp is expected to under-perform the Profound Medical. In addition to that, Transition Metals is 3.35 times more volatile than Profound Medical Corp. It trades about -0.15 of its total potential returns per unit of risk. Profound Medical Corp is currently generating about -0.04 per unit of volatility. If you would invest  1,061  in Profound Medical Corp on September 23, 2024 and sell it today you would lose (28.00) from holding Profound Medical Corp or give up 2.64% of portfolio value over 90 days.

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

Transition Metals Corp  vs.  Profound Medical Corp

Transition Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transition Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Transition Metals is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Profound Medical Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Profound Medical Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Profound Medical is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Transition Metals and Profound Medical

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

The idea behind Transition Metals Corp and Profound Medical 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.