Correlation Between Profound Medical and E Split

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

Diversification Opportunities for Profound Medical and E Split

-0.08

Correlation Coefficient

Profound Medical  E Split

Good diversification

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

Pair Corralation between Profound Medical and E Split

Assuming the 90 days trading horizon Profound Medical Corp is expected to generate 6.15 times more return on investment than E Split. However, Profound Medical is 6.15 times more volatile than E Split Corp. It trades about 0.04 of its potential returns per unit of risk. E Split Corp is currently generating about 0.21 per unit of risk. If you would invest  1,030  in Profound Medical Corp on September 1, 2024 and sell it today you would earn a total of  114.00  from holding Profound Medical Corp or generate 11.07% 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.  E Split Corp

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. 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.

E Split Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in E Split Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, E Split may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Profound Medical and E Split

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

The idea behind Profound Medical Corp and E Split 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.