Correlation Between Kontour (Xian) and Baoding Dongli

Can any of the company-specific risk be diversified away by investing in both Kontour (Xian) and Baoding Dongli 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 (Xian) and Baoding Dongli 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 Baoding Dongli Machinery, you can compare the effects of market volatilities on Kontour (Xian) and Baoding Dongli 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 (Xian) with a short position of Baoding Dongli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kontour (Xian) and Baoding Dongli.

Diversification Opportunities for Kontour (Xian) and Baoding Dongli

0.35

Correlation Coefficient

Kontour (Xian)  Baoding Dongli

Weak diversification

The 3 months correlation between Kontour and Baoding is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Kontour Medical Technology and Baoding Dongli Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baoding Dongli Machinery and Kontour (Xian) 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 Baoding Dongli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baoding Dongli Machinery has no effect on the direction of Kontour (Xian) i.e., Kontour (Xian) and Baoding Dongli go up and down completely randomly.

Pair Corralation between Kontour (Xian) and Baoding Dongli

Assuming the 90 days trading horizon Kontour (Xian) is expected to generate 59.9 times less return on investment than Baoding Dongli. But when comparing it to its historical volatility, Kontour Medical Technology is 1.0 times less risky than Baoding Dongli. It trades about 0.0 of its potential returns per unit of risk. Baoding Dongli Machinery is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,350  in Baoding Dongli Machinery on December 22, 2024 and sell it today you would earn a total of  746.00  from holding Baoding Dongli Machinery or generate 55.26% return on investment over 90 days.

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

Kontour Medical Technology  vs.  Baoding Dongli Machinery

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 (Xian) is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baoding Dongli Machinery

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Baoding Dongli Machinery are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Baoding Dongli sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kontour (Xian) and Baoding Dongli

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

The idea behind Kontour Medical Technology and Baoding Dongli Machinery 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.