Correlation Between Profound Medical and Hercules Metals

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

Diversification Opportunities for Profound Medical and Hercules Metals

-0.13

Correlation Coefficient

Profound Medical  Hercules Metals

Good diversification

The 3 months correlation between Profound and Hercules is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Profound Medical Corp and Hercules Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Metals 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 Hercules Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hercules Metals Corp has no effect on the direction of Profound Medical i.e., Profound Medical and Hercules Metals go up and down completely randomly.

Pair Corralation between Profound Medical and Hercules Metals

Assuming the 90 days trading horizon Profound Medical Corp is expected to generate 0.59 times more return on investment than Hercules Metals. However, Profound Medical Corp is 1.69 times less risky than Hercules Metals. It trades about 0.02 of its potential returns per unit of risk. Hercules Metals Corp is currently generating about -0.05 per unit of risk. If you would invest  1,015  in Profound Medical Corp on September 24, 2024 and sell it today you would earn a total of  18.00  from holding Profound Medical Corp or generate 1.77% return on investment over 90 days.

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

Profound Medical Corp  vs.  Hercules Metals Corp

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.

Hercules Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hercules Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Profound Medical and Hercules Metals

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

The idea behind Profound Medical Corp and Hercules Metals 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.