Correlation Between NetEase and Cirmaker Technology

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

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

Diversification Opportunities for NetEase and Cirmaker Technology

0.24

Correlation Coefficient

NetEase  Cirmaker Technology

Modest diversification

The 3 months correlation between NetEase and Cirmaker is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Cirmaker Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cirmaker Technology 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 Cirmaker Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cirmaker Technology has no effect on the direction of NetEase i.e., NetEase and Cirmaker Technology go up and down completely randomly.

Pair Corralation between NetEase and Cirmaker Technology

Given the investment horizon of 90 days NetEase is expected to generate 0.66 times more return on investment than Cirmaker Technology. However, NetEase is 1.51 times less risky than Cirmaker Technology. It trades about -0.02 of its potential returns per unit of risk. Cirmaker Technology is currently generating about -0.02 per unit of risk. If you would invest  9,396  in NetEase on October 8, 2024 and sell it today you would lose (571.00) from holding NetEase or give up 6.08% of portfolio value over 90 days.

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

NetEase  vs.  Cirmaker Technology

NetEase

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NetEase has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Cirmaker Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cirmaker Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, Cirmaker Technology is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NetEase and Cirmaker Technology

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

The idea behind NetEase and Cirmaker Technology 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.