Correlation Between Kontour Medical and Shandong

Can any of the company-specific risk be diversified away by investing in both Kontour Medical and Shandong 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 Shandong 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 Shandong Hi Speed RoadBridge, you can compare the effects of market volatilities on Kontour Medical and Shandong 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 Shandong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kontour Medical and Shandong.

Diversification Opportunities for Kontour Medical and Shandong

0.09

Correlation Coefficient

Kontour Medical  Shandong

Significant diversification

The 3 months correlation between Kontour and Shandong is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Kontour Medical Technology and Shandong Hi Speed RoadBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Hi Speed 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 Shandong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Hi Speed has no effect on the direction of Kontour Medical i.e., Kontour Medical and Shandong go up and down completely randomly.

Pair Corralation between Kontour Medical and Shandong

Assuming the 90 days trading horizon Kontour Medical Technology is expected to generate 1.52 times more return on investment than Shandong. However, Kontour Medical is 1.52 times more volatile than Shandong Hi Speed RoadBridge. It trades about 0.08 of its potential returns per unit of risk. Shandong Hi Speed RoadBridge is currently generating about -0.08 per unit of risk. If you would invest  2,680  in Kontour Medical Technology on October 25, 2024 and sell it today you would earn a total of  321.00  from holding Kontour Medical Technology or generate 11.98% return on investment over 90 days.

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

Kontour Medical Technology  vs.  Shandong Hi Speed RoadBridge

Kontour Medical Tech

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kontour Medical Technology are ranked lower than 6 (%) 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.

Shandong Hi Speed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Hi Speed RoadBridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Kontour Medical and Shandong

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

The idea behind Kontour Medical Technology and Shandong Hi Speed RoadBridge 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.