Correlation Between DIH Holdings and NetEase

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

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

Diversification Opportunities for DIH Holdings and NetEase

0.25

Correlation Coefficient

DIH Holdings  NetEase

Modest diversification

The 3 months correlation between DIH and NetEase is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding DIH Holdings US, and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and DIH Holdings 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 DIH Holdings US, 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 DIH Holdings i.e., DIH Holdings and NetEase go up and down completely randomly.

Pair Corralation between DIH Holdings and NetEase

Given the investment horizon of 90 days DIH Holdings US, is expected to generate 16.2 times more return on investment than NetEase. However, DIH Holdings is 16.2 times more volatile than NetEase. It trades about 0.12 of its potential returns per unit of risk. NetEase is currently generating about -0.41 per unit of risk. If you would invest  156.00  in DIH Holdings US, on October 10, 2024 and sell it today you would earn a total of  23.00  from holding DIH Holdings US, or generate 14.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

DIH Holdings US,  vs.  NetEase

DIH Holdings US,

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DIH Holdings US, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, DIH Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

NetEase

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 DIH Holdings and NetEase

The main advantage of trading using opposite DIH Holdings and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DIH Holdings 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 DIH Holdings US, 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.