Correlation Between Neogen and NetEase

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

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

Diversification Opportunities for Neogen and NetEase

-0.58

Correlation Coefficient

Neogen  NetEase

Excellent diversification

The 3 months correlation between Neogen and NetEase is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Neogen and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Neogen 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 Neogen 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 Neogen i.e., Neogen and NetEase go up and down completely randomly.

Pair Corralation between Neogen and NetEase

Given the investment horizon of 90 days Neogen is expected to generate 1.63 times more return on investment than NetEase. However, Neogen is 1.63 times more volatile than NetEase. It trades about 0.08 of its potential returns per unit of risk. NetEase is currently generating about -0.18 per unit of risk. If you would invest  1,270  in Neogen on October 12, 2024 and sell it today you would earn a total of  37.00  from holding Neogen or generate 2.91% return on investment over 90 days.

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

Neogen  vs.  NetEase

Neogen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neogen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NetEase

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 4 (%) 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 Neogen and NetEase

The main advantage of trading using opposite Neogen and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neogen 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 Neogen 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.