Correlation Between Champion Iron and Profound Medical

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

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

Diversification Opportunities for Champion Iron and Profound Medical

-0.09

Correlation Coefficient

Champion Iron  Profound Medical

Good diversification

The 3 months correlation between Champion and Profound is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Champion Iron 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 Champion Iron 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 Champion Iron 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 Champion Iron i.e., Champion Iron and Profound Medical go up and down completely randomly.

Pair Corralation between Champion Iron and Profound Medical

Assuming the 90 days trading horizon Champion Iron is expected to generate 2.68 times less return on investment than Profound Medical. But when comparing it to its historical volatility, Champion Iron is 1.06 times less risky than Profound Medical. It trades about 0.01 of its potential returns per unit of risk. Profound Medical Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,018  in Profound Medical Corp on September 23, 2024 and sell it today you would earn a total of  15.00  from holding Profound Medical Corp or generate 1.47% return on investment over 90 days.

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

Champion Iron  vs.  Profound Medical Corp

Champion Iron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Champion Iron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Champion Iron is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the 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 Champion Iron and Profound Medical

The main advantage of trading using opposite Champion Iron and Profound Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Iron 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 Champion Iron 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.