Correlation Between Albemarle and NetEase

Can any of the company-specific risk be diversified away by investing in both Albemarle and NetEase 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 Albemarle and NetEase into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Albemarle and NetEase, you can compare the effects of market volatilities on Albemarle and NetEase 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 Albemarle with a short position of NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albemarle and NetEase.

Diversification Opportunities for Albemarle and NetEase

-0.05

Correlation Coefficient

Albemarle  NetEase

Good diversification

The 3 months correlation between Albemarle and NetEase is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Albemarle 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 Albemarle are associated (or correlated) with NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of Albemarle i.e., Albemarle and NetEase go up and down completely randomly.

Pair Corralation between Albemarle and NetEase

Assuming the 90 days trading horizon Albemarle is expected to under-perform the NetEase. In addition to that, Albemarle is 1.39 times more volatile than NetEase. It trades about -0.4 of its total potential returns per unit of risk. NetEase is currently generating about -0.52 per unit of volatility. If you would invest  10,096  in NetEase on October 8, 2024 and sell it today you would lose (1,274) from holding NetEase or give up 12.62% of portfolio value over 90 days.

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

Albemarle  vs.  NetEase

Albemarle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Albemarle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

NetEase

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NetEase has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, NetEase is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Albemarle and NetEase

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

The idea behind Albemarle and NetEase 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.