Correlation Between Profound Medical and Rochester Resources
Can any of the company-specific risk be diversified away by investing in both Profound Medical and Rochester Resources 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 Rochester Resources 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 Rochester Resources, you can compare the effects of market volatilities on Profound Medical and Rochester Resources 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 Rochester Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profound Medical and Rochester Resources.
Diversification Opportunities for Profound Medical and Rochester Resources
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Profound and Rochester is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Profound Medical Corp and Rochester Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rochester Resources 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 Rochester Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rochester Resources has no effect on the direction of Profound Medical i.e., Profound Medical and Rochester Resources go up and down completely randomly.
Pair Corralation between Profound Medical and Rochester Resources
Assuming the 90 days trading horizon Profound Medical Corp is expected to under-perform the Rochester Resources. But the stock apears to be less risky and, when comparing its historical volatility, Profound Medical Corp is 4.5 times less risky than Rochester Resources. The stock trades about -0.1 of its potential returns per unit of risk. The Rochester Resources is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2.00 in Rochester Resources on September 13, 2024 and sell it today you would earn a total of 1.00 from holding Rochester Resources or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Profound Medical Corp vs. Rochester Resources
Performance |
| Timeline |
| Profound Medical Corp |
| Rochester Resources |
Profound Medical and Rochester Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Profound Medical and Rochester Resources
The main advantage of trading using opposite Profound Medical and Rochester Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Profound Medical position performs unexpectedly, Rochester Resources 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 Rochester Resources will offset losses from the drop in Rochester Resources' long position.| Profound Medical vs. JPMorgan Chase Co | Profound Medical vs. Bank of America | Profound Medical vs. Toronto Dominion Bank | Profound Medical vs. Royal Bank of |
| Rochester Resources vs. Sangoma Technologies Corp | Rochester Resources vs. VIP Entertainment Technologies | Rochester Resources vs. Medical Facilities | Rochester Resources vs. Profound Medical Corp |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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