Correlation Between Shanghai Material and Kontour Medical

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

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

Diversification Opportunities for Shanghai Material and Kontour Medical

-0.03

Correlation Coefficient

Shanghai Material  Kontour Medical

Good diversification

The 3 months correlation between Shanghai and Kontour is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Material Trading 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 Shanghai Material 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 Shanghai Material Trading 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 Shanghai Material i.e., Shanghai Material and Kontour Medical go up and down completely randomly.

Pair Corralation between Shanghai Material and Kontour Medical

Assuming the 90 days trading horizon Shanghai Material Trading is expected to under-perform the Kontour Medical. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Material Trading is 1.81 times less risky than Kontour Medical. The stock trades about -0.04 of its potential returns per unit of risk. The Kontour Medical Technology is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,854  in Kontour Medical Technology on December 26, 2024 and sell it today you would lose (59.00) from holding Kontour Medical Technology or give up 2.07% of portfolio value over 90 days.

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

Shanghai Material Trading  vs.  Kontour Medical Technology

Shanghai Material Trading

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Material Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shanghai Material is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kontour Medical Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kontour Medical Technology has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Shanghai Material and Kontour Medical

The main advantage of trading using opposite Shanghai Material and Kontour Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Material 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 Shanghai Material Trading 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.