Correlation Between NetEase and Compass Digital

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

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

Diversification Opportunities for NetEase and Compass Digital

-0.03

Correlation Coefficient

NetEase  Compass Digital

Good diversification

The 3 months correlation between NetEase and Compass is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Compass Digital Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Digital Acqu 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 Compass Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Digital Acqu has no effect on the direction of NetEase i.e., NetEase and Compass Digital go up and down completely randomly.

Pair Corralation between NetEase and Compass Digital

If you would invest  9,231  in NetEase on October 26, 2024 and sell it today you would earn a total of  714.00  from holding NetEase or generate 7.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.56%
Values	Daily Returns

NetEase  vs.  Compass Digital Acquisition

NetEase

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 10 (%) 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.

Compass Digital Acqu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compass Digital Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Compass Digital is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with NetEase and Compass Digital

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

The idea behind NetEase and Compass Digital Acquisition 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..