Correlation Between Kontour Medical and Hengli Petrochemical

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

Diversification Opportunities for Kontour Medical and Hengli Petrochemical

0.79

Correlation Coefficient

Kontour Medical  Hengli Petrochemical

Poor diversification

The 3 months correlation between Kontour and Hengli is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Kontour Medical Technology and Hengli Petrochemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengli Petrochemical 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 Hengli Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengli Petrochemical has no effect on the direction of Kontour Medical i.e., Kontour Medical and Hengli Petrochemical go up and down completely randomly.

Pair Corralation between Kontour Medical and Hengli Petrochemical

Assuming the 90 days trading horizon Kontour Medical Technology is expected to generate 1.92 times more return on investment than Hengli Petrochemical. However, Kontour Medical is 1.92 times more volatile than Hengli Petrochemical Co. It trades about 0.09 of its potential returns per unit of risk. Hengli Petrochemical Co is currently generating about 0.07 per unit of risk. If you would invest  2,774  in Kontour Medical Technology on September 20, 2024 and sell it today you would earn a total of  131.00  from holding Kontour Medical Technology or generate 4.72% return on investment over 90 days.

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

Kontour Medical Technology  vs.  Hengli Petrochemical Co

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.

Hengli Petrochemical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hengli Petrochemical Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengli Petrochemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kontour Medical and Hengli Petrochemical

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

The idea behind Kontour Medical Technology and Hengli Petrochemical Co 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.