Correlation Between Kontour Medical and Success Electronics

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

Diversification Opportunities for Kontour Medical and Success Electronics

0.85

Correlation Coefficient

Kontour Medical  Success Electronics

Very poor diversification

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

Pair Corralation between Kontour Medical and Success Electronics

Assuming the 90 days trading horizon Kontour Medical is expected to generate 1.41 times less return on investment than Success Electronics. But when comparing it to its historical volatility, Kontour Medical Technology is 1.01 times less risky than Success Electronics. It trades about 0.03 of its potential returns per unit of risk. Success Electronics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  379.00  in Success Electronics on September 25, 2024 and sell it today you would earn a total of  6.00  from holding Success Electronics or generate 1.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Kontour Medical Technology  vs.  Success Electronics

Kontour Medical Tech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kontour Medical Technology are ranked lower than 9 (%) 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.

Success Electronics

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Kontour Medical and Success Electronics

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

The idea behind Kontour Medical Technology and Success Electronics 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.