Correlation Between Kontour Medical and Jilin Chemical

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

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

Diversification Opportunities for Kontour Medical and Jilin Chemical

0.85

Correlation Coefficient

Kontour Medical  Jilin Chemical

Very poor diversification

The 3 months correlation between Kontour and Jilin is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Kontour Medical Technology and Jilin Chemical Fibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jilin Chemical Fibre and Kontour 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 Kontour Medical Technology are associated (or correlated) with Jilin Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jilin Chemical Fibre has no effect on the direction of Kontour Medical i.e., Kontour Medical and Jilin Chemical go up and down completely randomly.

Pair Corralation between Kontour Medical and Jilin Chemical

Assuming the 90 days trading horizon Kontour Medical is expected to generate 1.03 times less return on investment than Jilin Chemical. In addition to that, Kontour Medical is 1.13 times more volatile than Jilin Chemical Fibre. It trades about 0.01 of its total potential returns per unit of risk. Jilin Chemical Fibre is currently generating about 0.01 per unit of volatility. If you would invest  443.00  in Jilin Chemical Fibre on September 20, 2024 and sell it today you would lose (35.00) from holding Jilin Chemical Fibre or give up 7.9% of portfolio value over 90 days.

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

Kontour Medical Technology  vs.  Jilin Chemical Fibre

Kontour Medical Tech

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kontour Medical Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kontour Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Jilin Chemical Fibre

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jilin Chemical Fibre are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jilin Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kontour Medical and Jilin Chemical

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

The idea behind Kontour Medical Technology and Jilin Chemical Fibre 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.