Correlation Between Kontour Medical and Shaanxi Beiyuan

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

Diversification Opportunities for Kontour Medical and Shaanxi Beiyuan

0.64

Correlation Coefficient

Kontour Medical  Shaanxi Beiyuan

Poor diversification

The 3 months correlation between Kontour and Shaanxi is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Kontour Medical Technology and Shaanxi Beiyuan Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Beiyuan Chemical 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 Shaanxi Beiyuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Beiyuan Chemical has no effect on the direction of Kontour Medical i.e., Kontour Medical and Shaanxi Beiyuan go up and down completely randomly.

Pair Corralation between Kontour Medical and Shaanxi Beiyuan

Assuming the 90 days trading horizon Kontour Medical Technology is expected to generate 1.85 times more return on investment than Shaanxi Beiyuan. However, Kontour Medical is 1.85 times more volatile than Shaanxi Beiyuan Chemical. It trades about 0.07 of its potential returns per unit of risk. Shaanxi Beiyuan Chemical is currently generating about 0.02 per unit of risk. If you would invest  2,661  in Kontour Medical Technology on October 20, 2024 and sell it today you would earn a total of  274.00  from holding Kontour Medical Technology or generate 10.3% 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.  Shaanxi Beiyuan Chemical

Kontour Medical Tech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kontour Medical Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kontour Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shaanxi Beiyuan Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Beiyuan Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shaanxi Beiyuan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kontour Medical and Shaanxi Beiyuan

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

The idea behind Kontour Medical Technology and Shaanxi Beiyuan Chemical 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.