Correlation Between Corsair Gaming and NetEase

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

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

Diversification Opportunities for Corsair Gaming and NetEase

0.72

Correlation Coefficient

Corsair Gaming  NetEase

Poor diversification

The 3 months correlation between Corsair and NetEase is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Corsair Gaming and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Corsair Gaming 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 Corsair Gaming 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 Corsair Gaming i.e., Corsair Gaming and NetEase go up and down completely randomly.

Pair Corralation between Corsair Gaming and NetEase

Given the investment horizon of 90 days Corsair Gaming is expected to generate 1.8 times more return on investment than NetEase. However, Corsair Gaming is 1.8 times more volatile than NetEase. It trades about 0.15 of its potential returns per unit of risk. NetEase is currently generating about 0.08 per unit of risk. If you would invest  759.00  in Corsair Gaming on December 5, 2024 and sell it today you would earn a total of  343.00  from holding Corsair Gaming or generate 45.19% return on investment over 90 days.

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

Corsair Gaming  vs.  NetEase

Corsair Gaming

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Corsair Gaming are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Corsair Gaming reported solid returns over the last few months and may actually be approaching a breakup point.

NetEase

Risk-Adjusted Performance

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 Corsair Gaming and NetEase

The main advantage of trading using opposite Corsair Gaming and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corsair Gaming 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 Corsair Gaming 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.