Correlation Between Mobileye Global and NetEase

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

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

Diversification Opportunities for Mobileye Global and NetEase

0.19

Correlation Coefficient

Mobileye Global  NetEase

Average diversification

The 3 months correlation between Mobileye and NetEase is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Mobileye Global Class and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Mobileye Global 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 Mobileye Global Class 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 Mobileye Global i.e., Mobileye Global and NetEase go up and down completely randomly.

Pair Corralation between Mobileye Global and NetEase

Given the investment horizon of 90 days Mobileye Global Class is expected to under-perform the NetEase. But the stock apears to be less risky and, when comparing its historical volatility, Mobileye Global Class is 1.23 times less risky than NetEase. The stock trades about -0.02 of its potential returns per unit of risk. The NetEase is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,897  in NetEase on October 8, 2024 and sell it today you would lose (50.00) from holding NetEase or give up 2.64% of portfolio value over 90 days.

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

Mobileye Global Class  vs.  NetEase

Mobileye Global Class

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mobileye Global Class are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Mobileye Global showed solid returns over the last few months and may actually be approaching a breakup point.

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 Mobileye Global and NetEase

The main advantage of trading using opposite Mobileye Global and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mobileye Global 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 Mobileye Global Class 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.