Correlation Between Profound Medical and Neuropace
Can any of the company-specific risk be diversified away by investing in both Profound Medical and Neuropace 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 Neuropace 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 Neuropace, you can compare the effects of market volatilities on Profound Medical and Neuropace 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 Neuropace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profound Medical and Neuropace.
Diversification Opportunities for Profound Medical and Neuropace
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Profound and Neuropace is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Profound Medical Corp and Neuropace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neuropace 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 Neuropace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neuropace has no effect on the direction of Profound Medical i.e., Profound Medical and Neuropace go up and down completely randomly.
Pair Corralation between Profound Medical and Neuropace
Given the investment horizon of 90 days Profound Medical is expected to generate 4.88 times less return on investment than Neuropace. But when comparing it to its historical volatility, Profound Medical Corp is 1.71 times less risky than Neuropace. It trades about 0.13 of its potential returns per unit of risk. Neuropace is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 629.00 in Neuropace on September 2, 2024 and sell it today you would earn a total of 431.00 from holding Neuropace or generate 68.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Profound Medical Corp vs. Neuropace
Performance |
| Timeline |
| Profound Medical Corp |
| Neuropace |
Profound Medical and Neuropace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Profound Medical and Neuropace
The main advantage of trading using opposite Profound Medical and Neuropace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Profound Medical position performs unexpectedly, Neuropace 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 Neuropace will offset losses from the drop in Neuropace's long position.| Profound Medical vs. Si Bone | Profound Medical vs. Sight Sciences | Profound Medical vs. Nevro Corp | Profound Medical vs. Paragon 28 |
| Neuropace vs. Electromed | Neuropace vs. Orthopediatrics Corp | Neuropace vs. SurModics | Neuropace vs. Paragon 28 |
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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