Correlation Between NetEase and Nexters Warrant

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

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

Diversification Opportunities for NetEase and Nexters Warrant

0.07

Correlation Coefficient

NetEase  Nexters Warrant

Significant diversification

The 3 months correlation between NetEase and Nexters is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Nexters Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexters Warrant 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 Nexters Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexters Warrant has no effect on the direction of NetEase i.e., NetEase and Nexters Warrant go up and down completely randomly.

Pair Corralation between NetEase and Nexters Warrant

Given the investment horizon of 90 days NetEase is expected to generate 17.47 times less return on investment than Nexters Warrant. In addition to that, NetEase is 1.15 times more volatile than Nexters Warrant. It trades about 0.02 of its total potential returns per unit of risk. Nexters Warrant is currently generating about 0.39 per unit of volatility. If you would invest  1.72  in Nexters Warrant on October 3, 2024 and sell it today you would earn a total of  0.08  from holding Nexters Warrant or generate 4.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	23.81%
Values	Daily Returns

NetEase  vs.  Nexters Warrant

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Nexters Warrant

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexters Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with NetEase and Nexters Warrant

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

The idea behind NetEase and Nexters Warrant 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.