Correlation Between Allient and NetEase

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

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

Diversification Opportunities for Allient and NetEase

0.26

Correlation Coefficient

Allient  NetEase

Modest diversification

The 3 months correlation between Allient and NetEase is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Allient and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Allient 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 Allient 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 Allient i.e., Allient and NetEase go up and down completely randomly.

Pair Corralation between Allient and NetEase

Given the investment horizon of 90 days Allient is expected to generate 1.09 times more return on investment than NetEase. However, Allient is 1.09 times more volatile than NetEase. It trades about 0.0 of its potential returns per unit of risk. NetEase is currently generating about -0.01 per unit of risk. If you would invest  2,598  in Allient on September 21, 2024 and sell it today you would lose (236.00) from holding Allient or give up 9.08% of portfolio value over 90 days.

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

Allient  vs.  NetEase

Allient

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allient are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Allient unveiled solid returns over the last few months and may actually be approaching a breakup point.

NetEase

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, NetEase unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allient and NetEase

The main advantage of trading using opposite Allient and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allient 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 Allient 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.