Correlation Between Tela Bio and Profound Medical

Can any of the company-specific risk be diversified away by investing in both Tela Bio and Profound Medical 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 Tela Bio and Profound Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tela Bio and Profound Medical Corp, you can compare the effects of market volatilities on Tela Bio and Profound Medical 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 Tela Bio with a short position of Profound Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tela Bio and Profound Medical.

Diversification Opportunities for Tela Bio and Profound Medical

0.75

Correlation Coefficient

Tela Bio  Profound Medical

Poor diversification

The 3 months correlation between Tela and Profound is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Tela Bio and Profound Medical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profound Medical Corp and Tela Bio 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 Tela Bio are associated (or correlated) with Profound Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profound Medical Corp has no effect on the direction of Tela Bio i.e., Tela Bio and Profound Medical go up and down completely randomly.

Pair Corralation between Tela Bio and Profound Medical

Given the investment horizon of 90 days Tela Bio is expected to under-perform the Profound Medical. In addition to that, Tela Bio is 1.21 times more volatile than Profound Medical Corp. It trades about -0.2 of its total potential returns per unit of risk. Profound Medical Corp is currently generating about -0.14 per unit of volatility. If you would invest  881.00  in Profound Medical Corp on February 5, 2024 and sell it today you would lose (145.00) from holding Profound Medical Corp or give up 16.46% of portfolio value over 90 days.

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

Tela Bio  vs.  Profound Medical Corp

Tela Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tela Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Tela Bio and Profound Medical

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

The idea behind Tela Bio and Profound Medical 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.