Correlation Between NetEase and ICC Holdings

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Can any of the company-specific risk be diversified away by investing in both NetEase and ICC 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 ICC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NetEase and ICC Holdings, you can compare the effects of market volatilities on NetEase and ICC 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 ICC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetEase and ICC Holdings.

Diversification Opportunities for NetEase and ICC Holdings

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between NetEase and ICC is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and ICC Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICC 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 ICC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICC Holdings has no effect on the direction of NetEase i.e., NetEase and ICC Holdings go up and down completely randomly.

Pair Corralation between NetEase and ICC Holdings

Given the investment horizon of 90 days NetEase is expected to generate 5.6 times more return on investment than ICC Holdings. However, NetEase is 5.6 times more volatile than ICC Holdings. It trades about 0.11 of its potential returns per unit of risk. ICC Holdings is currently generating about 0.12 per unit of risk. If you would invest  8,709  in NetEase on September 21, 2024 and sell it today you would earn a total of  540.00  from holding NetEase or generate 6.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

NetEase  vs.  ICC Holdings

 Performance 
       Timeline  
NetEase 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 6 (%) 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.
ICC Holdings 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in ICC Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, ICC Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

NetEase and ICC Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NetEase and ICC Holdings

The main advantage of trading using opposite NetEase and ICC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetEase position performs unexpectedly, ICC 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 ICC Holdings will offset losses from the drop in ICC Holdings' long position.
The idea behind NetEase and ICC 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.
Check out your portfolio center.
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 Global Correlations module to find global opportunities by holding instruments from different markets.

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