Correlation Between NetEase and Azure Holding

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

By analyzing existing cross correlation between NetEase and Azure Holding Group, you can compare the effects of market volatilities on NetEase and Azure Holding 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 Azure Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetEase and Azure Holding.

Diversification Opportunities for NetEase and Azure Holding

-0.13

Correlation Coefficient

NetEase  Azure Holding

Good diversification

The 3 months correlation between NetEase and Azure is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Azure Holding Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azure Holding Group 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 Azure Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azure Holding Group has no effect on the direction of NetEase i.e., NetEase and Azure Holding go up and down completely randomly.

Pair Corralation between NetEase and Azure Holding

Given the investment horizon of 90 days NetEase is expected to generate 0.09 times more return on investment than Azure Holding. However, NetEase is 11.24 times less risky than Azure Holding. It trades about -0.41 of its potential returns per unit of risk. Azure Holding Group is currently generating about -0.05 per unit of risk. If you would invest  10,096  in NetEase on October 10, 2024 and sell it today you would lose (1,124) from holding NetEase or give up 11.13% of portfolio value over 90 days.

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

NetEase  vs.  Azure Holding Group

NetEase

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, NetEase is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Azure Holding Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Azure Holding Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Azure Holding demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NetEase and Azure Holding

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

The idea behind NetEase and Azure Holding Group 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.