Correlation Between Kontour Medical and CNOOC

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

Diversification Opportunities for Kontour Medical and CNOOC

0.21

Correlation Coefficient

Kontour Medical  CNOOC

Modest diversification

The 3 months correlation between Kontour and CNOOC is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Kontour Medical Technology and CNOOC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC Limited 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 CNOOC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNOOC Limited has no effect on the direction of Kontour Medical i.e., Kontour Medical and CNOOC go up and down completely randomly.

Pair Corralation between Kontour Medical and CNOOC

Assuming the 90 days trading horizon Kontour Medical Technology is expected to generate 1.58 times more return on investment than CNOOC. However, Kontour Medical is 1.58 times more volatile than CNOOC Limited. It trades about 0.15 of its potential returns per unit of risk. CNOOC Limited is currently generating about 0.05 per unit of risk. If you would invest  2,305  in Kontour Medical Technology on September 15, 2024 and sell it today you would earn a total of  724.00  from holding Kontour Medical Technology or generate 31.41% 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.  CNOOC Limited

Kontour Medical Tech

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kontour Medical Technology are ranked lower than 12 (%) 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.

CNOOC Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CNOOC Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CNOOC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kontour Medical and CNOOC

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

The idea behind Kontour Medical Technology and CNOOC Limited 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.