Correlation Between NetEase and Assurant

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

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

Diversification Opportunities for NetEase and Assurant

0.26

Correlation Coefficient

NetEase  Assurant

Modest diversification

The 3 months correlation between NetEase and Assurant is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Assurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assurant and NetEase 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 NetEase are associated (or correlated) with Assurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assurant has no effect on the direction of NetEase i.e., NetEase and Assurant go up and down completely randomly.

Pair Corralation between NetEase and Assurant

Given the investment horizon of 90 days NetEase is expected to generate 2.25 times more return on investment than Assurant. However, NetEase is 2.25 times more volatile than Assurant. It trades about 0.08 of its potential returns per unit of risk. Assurant is currently generating about -0.21 per unit of risk. If you would invest  8,782  in NetEase on September 19, 2024 and sell it today you would earn a total of  358.00  from holding NetEase or generate 4.08% return on investment over 90 days.

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

NetEase  vs.  Assurant

NetEase

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, NetEase unveiled solid returns over the last few months and may actually be approaching a breakup point.

Assurant

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Assurant are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward indicators, Assurant may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NetEase and Assurant

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

The idea behind NetEase and Assurant 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.