Correlation Between Profound Medical and Venus Concept

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

Diversification Opportunities for Profound Medical and Venus Concept

0.08

Correlation Coefficient

Profound Medical  Venus Concept

Significant diversification

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

Pair Corralation between Profound Medical and Venus Concept

Given the investment horizon of 90 days Profound Medical Corp is expected to generate 0.69 times more return on investment than Venus Concept. However, Profound Medical Corp is 1.45 times less risky than Venus Concept. It trades about 0.0 of its potential returns per unit of risk. Venus Concept is currently generating about -0.24 per unit of risk. If you would invest  820.00  in Profound Medical Corp on September 3, 2024 and sell it today you would lose (8.00) from holding Profound Medical Corp or give up 0.98% of portfolio value over 90 days.

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

Profound Medical Corp  vs.  Venus Concept

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. Despite nearly stable basic indicators, Profound Medical is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Venus Concept

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Venus Concept has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Profound Medical and Venus Concept

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

The idea behind Profound Medical Corp and Venus Concept 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.