Correlation Between NetEase and CaliberCos

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

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

Diversification Opportunities for NetEase and CaliberCos

-0.27

Correlation Coefficient

NetEase  CaliberCos

Very good diversification

The 3 months correlation between NetEase and CaliberCos is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and CaliberCos Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CaliberCos Class A 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 CaliberCos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CaliberCos Class A has no effect on the direction of NetEase i.e., NetEase and CaliberCos go up and down completely randomly.

Pair Corralation between NetEase and CaliberCos

Given the investment horizon of 90 days NetEase is expected to generate 0.43 times more return on investment than CaliberCos. However, NetEase is 2.31 times less risky than CaliberCos. It trades about 0.14 of its potential returns per unit of risk. CaliberCos Class A is currently generating about 0.0 per unit of risk. If you would invest  7,934  in NetEase on October 25, 2024 and sell it today you would earn a total of  1,958  from holding NetEase or generate 24.67% return on investment over 90 days.

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

NetEase  vs.  CaliberCos Class A

NetEase

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 11 (%) 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.

CaliberCos Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CaliberCos Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CaliberCos is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NetEase and CaliberCos

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

The idea behind NetEase and CaliberCos Class A 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.