Correlation Between The9 and Ferrovial

Can any of the company-specific risk be diversified away by investing in both The9 and Ferrovial 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 The9 and Ferrovial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The9 Ltd ADR and Ferrovial, you can compare the effects of market volatilities on The9 and Ferrovial 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 The9 with a short position of Ferrovial. Check out your portfolio center. Please also check ongoing floating volatility patterns of The9 and Ferrovial.

Diversification Opportunities for The9 and Ferrovial

0.77

Correlation Coefficient

The9  Ferrovial

Poor diversification

The 3 months correlation between The9 and Ferrovial is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The9 Ltd ADR and Ferrovial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrovial and The9 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 The9 Ltd ADR are associated (or correlated) with Ferrovial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrovial has no effect on the direction of The9 i.e., The9 and Ferrovial go up and down completely randomly.

Pair Corralation between The9 and Ferrovial

If you would invest  702.00  in The9 Ltd ADR on September 5, 2024 and sell it today you would earn a total of  753.00  from holding The9 Ltd ADR or generate 107.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

The9 Ltd ADR  vs.  Ferrovial

The9 Ltd ADR

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The9 Ltd ADR are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, The9 showed solid returns over the last few months and may actually be approaching a breakup point.

Ferrovial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ferrovial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ferrovial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with The9 and Ferrovial

The main advantage of trading using opposite The9 and Ferrovial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The9 position performs unexpectedly, Ferrovial 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 Ferrovial will offset losses from the drop in Ferrovial's long position.

The idea behind The9 Ltd ADR and Ferrovial 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.