Correlation Between Profound Medical and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Profound Medical and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Profound Medical and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profound Medical and Dow Jones.
Diversification Opportunities for Profound Medical and Dow Jones
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Profound and Dow is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Profound Medical Corp and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Profound Medical i.e., Profound Medical and Dow Jones go up and down completely randomly.
Pair Corralation between Profound Medical and Dow Jones
Given the investment horizon of 90 days Profound Medical Corp is expected to generate 4.52 times more return on investment than Dow Jones. However, Profound Medical is 4.52 times more volatile than Dow Jones Industrial. It trades about 0.06 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of risk. If you would invest 754.00 in Profound Medical Corp on August 29, 2024 and sell it today you would earn a total of 30.00 from holding Profound Medical Corp or generate 3.98% 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. Dow Jones Industrial
Performance |
| Timeline |
Profound Medical and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Profound Medical Corp
Pair trading matchups for Profound Medical
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Profound Medical and Dow Jones
The main advantage of trading using opposite Profound Medical and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Profound Medical position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Profound Medical vs. Si Bone | Profound Medical vs. Sight Sciences | Profound Medical vs. Nevro Corp | Profound Medical vs. Paragon 28 |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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