Correlation Between Kontour Medical and Guangzhou Dongfang

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

Diversification Opportunities for Kontour Medical and Guangzhou Dongfang

0.4

Correlation Coefficient

Kontour Medical  Guangzhou Dongfang

Very weak diversification

The 3 months correlation between Kontour and Guangzhou is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Kontour Medical Technology and Guangzhou Dongfang Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Dongfang Hotel 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 Guangzhou Dongfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Dongfang Hotel has no effect on the direction of Kontour Medical i.e., Kontour Medical and Guangzhou Dongfang go up and down completely randomly.

Pair Corralation between Kontour Medical and Guangzhou Dongfang

Assuming the 90 days trading horizon Kontour Medical Technology is expected to generate 1.11 times more return on investment than Guangzhou Dongfang. However, Kontour Medical is 1.11 times more volatile than Guangzhou Dongfang Hotel. It trades about 0.08 of its potential returns per unit of risk. Guangzhou Dongfang Hotel is currently generating about -0.04 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  322.00  from holding Kontour Medical Technology or generate 12.01% return on investment over 90 days.

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

Kontour Medical Technology  vs.  Guangzhou Dongfang Hotel

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.

Guangzhou Dongfang Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangzhou Dongfang Hotel 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 Guangzhou Dongfang

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

The idea behind Kontour Medical Technology and Guangzhou Dongfang Hotel 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.