Correlation Between Evolution Mining and NetEase

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

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

Diversification Opportunities for Evolution Mining and NetEase

-0.06

Correlation Coefficient

Evolution Mining  NetEase

Good diversification

The 3 months correlation between Evolution and NetEase is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Mining and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Evolution Mining 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 Evolution Mining 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 Evolution Mining i.e., Evolution Mining and NetEase go up and down completely randomly.

Pair Corralation between Evolution Mining and NetEase

Assuming the 90 days horizon Evolution Mining is expected to generate 2.18 times less return on investment than NetEase. But when comparing it to its historical volatility, Evolution Mining is 1.33 times less risky than NetEase. It trades about 0.12 of its potential returns per unit of risk. NetEase is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  8,506  in NetEase on September 16, 2024 and sell it today you would earn a total of  1,039  from holding NetEase or generate 12.21% return on investment over 90 days.

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

Evolution Mining  vs.  NetEase

Evolution Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Evolution Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NetEase

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, NetEase unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evolution Mining and NetEase

The main advantage of trading using opposite Evolution Mining and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolution Mining 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 Evolution Mining 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.