Correlation Between NetEase and Brandywine Realty

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

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

Diversification Opportunities for NetEase and Brandywine Realty

0.09

Correlation Coefficient

NetEase  Brandywine Realty

Significant diversification

The 3 months correlation between NetEase and Brandywine is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Brandywine Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandywine Realty Trust 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 Brandywine Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandywine Realty Trust has no effect on the direction of NetEase i.e., NetEase and Brandywine Realty go up and down completely randomly.

Pair Corralation between NetEase and Brandywine Realty

Given the investment horizon of 90 days NetEase is expected to generate 0.57 times more return on investment than Brandywine Realty. However, NetEase is 1.76 times less risky than Brandywine Realty. It trades about -0.18 of its potential returns per unit of risk. Brandywine Realty Trust is currently generating about -0.14 per unit of risk. If you would invest  9,690  in NetEase on October 12, 2024 and sell it today you would lose (462.00) from holding NetEase or give up 4.77% of portfolio value over 90 days.

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

NetEase  vs.  Brandywine Realty Trust

NetEase

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 5 (%) 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.

Brandywine Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brandywine Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with NetEase and Brandywine Realty

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

The idea behind NetEase and Brandywine Realty Trust 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.