Correlation Between Shandong Rike and Kontour Medical

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

By analyzing existing cross correlation between Shandong Rike Chemical and Kontour Medical Technology, you can compare the effects of market volatilities on Shandong Rike and Kontour 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 Shandong Rike with a short position of Kontour Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Rike and Kontour Medical.

Diversification Opportunities for Shandong Rike and Kontour Medical

0.77

Correlation Coefficient

Shandong Rike  Kontour Medical

Poor diversification

The 3 months correlation between Shandong and Kontour is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Rike Chemical and Kontour Medical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontour Medical Tech and Shandong Rike 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 Shandong Rike Chemical are associated (or correlated) with Kontour Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kontour Medical Tech has no effect on the direction of Shandong Rike i.e., Shandong Rike and Kontour Medical go up and down completely randomly.

Pair Corralation between Shandong Rike and Kontour Medical

Assuming the 90 days trading horizon Shandong Rike is expected to generate 1.7 times less return on investment than Kontour Medical. In addition to that, Shandong Rike is 1.19 times more volatile than Kontour Medical Technology. It trades about 0.04 of its total potential returns per unit of risk. Kontour Medical Technology is currently generating about 0.07 per unit of volatility. If you would invest  2,047  in Kontour Medical Technology on October 9, 2024 and sell it today you would earn a total of  762.00  from holding Kontour Medical Technology or generate 37.23% return on investment over 90 days.

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

Shandong Rike Chemical  vs.  Kontour Medical Technology

Shandong Rike Chemical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Rike Chemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Rike sustained solid returns over the last few months and may actually be approaching a breakup point.

Kontour Medical Tech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kontour Medical Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kontour Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shandong Rike and Kontour Medical

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

The idea behind Shandong Rike Chemical and Kontour Medical Technology 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.