Correlation Between Bilibili and NetEase

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

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

Diversification Opportunities for Bilibili and NetEase

0.21

Correlation Coefficient

Bilibili  NetEase

Modest diversification

The 3 months correlation between Bilibili and NetEase is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Bilibili and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Bilibili 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 Bilibili 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 Bilibili i.e., Bilibili and NetEase go up and down completely randomly.

Pair Corralation between Bilibili and NetEase

Given the investment horizon of 90 days Bilibili is expected to under-perform the NetEase. But the stock apears to be less risky and, when comparing its historical volatility, Bilibili is 1.18 times less risky than NetEase. The stock trades about -0.08 of its potential returns per unit of risk. The NetEase is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,059  in NetEase on October 8, 2024 and sell it today you would lose (212.00) from holding NetEase or give up 10.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Bilibili  vs.  NetEase

Bilibili

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bilibili has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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. Despite nearly stable basic indicators, NetEase is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bilibili and NetEase

The main advantage of trading using opposite Bilibili and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bilibili 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 Bilibili 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.