Correlation Between AG Mortgage and NetEase

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

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

Diversification Opportunities for AG Mortgage and NetEase

0.33

Correlation Coefficient

AG Mortgage  NetEase

Weak diversification

The 3 months correlation between MITN and NetEase is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding AG Mortgage Investment and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and AG Mortgage 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 AG Mortgage Investment 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 AG Mortgage i.e., AG Mortgage and NetEase go up and down completely randomly.

Pair Corralation between AG Mortgage and NetEase

Given the investment horizon of 90 days AG Mortgage Investment is expected to generate 0.16 times more return on investment than NetEase. However, AG Mortgage Investment is 6.4 times less risky than NetEase. It trades about 0.25 of its potential returns per unit of risk. NetEase is currently generating about -0.16 per unit of risk. If you would invest  2,509  in AG Mortgage Investment on October 11, 2024 and sell it today you would earn a total of  26.00  from holding AG Mortgage Investment or generate 1.04% return on investment over 90 days.

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

AG Mortgage Investment  vs.  NetEase

AG Mortgage Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AG Mortgage Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AG Mortgage is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

NetEase

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, NetEase may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with AG Mortgage and NetEase

The main advantage of trading using opposite AG Mortgage and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AG Mortgage 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 AG Mortgage Investment 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 Stocks Directory module to find actively traded stocks across global markets.