Correlation Between NetEase and GameSquare Holdings

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

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

Diversification Opportunities for NetEase and GameSquare Holdings

-0.11

Correlation Coefficient

NetEase  GameSquare Holdings

Good diversification

The 3 months correlation between NetEase and GameSquare is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and GameSquare Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameSquare Holdings 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 GameSquare Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GameSquare Holdings has no effect on the direction of NetEase i.e., NetEase and GameSquare Holdings go up and down completely randomly.

Pair Corralation between NetEase and GameSquare Holdings

Given the investment horizon of 90 days NetEase is expected to generate 0.43 times more return on investment than GameSquare Holdings. However, NetEase is 2.35 times less risky than GameSquare Holdings. It trades about 0.1 of its potential returns per unit of risk. GameSquare Holdings is currently generating about -0.06 per unit of risk. If you would invest  8,925  in NetEase on December 30, 2024 and sell it today you would earn a total of  1,147  from holding NetEase or generate 12.85% return on investment over 90 days.

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

NetEase  vs.  GameSquare Holdings

NetEase

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 7 (%) 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.

GameSquare Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days GameSquare Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with NetEase and GameSquare Holdings

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

The idea behind NetEase and GameSquare Holdings 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.