Correlation Between NetEase and Lizhan Environmental

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

Diversification Opportunities for NetEase and Lizhan Environmental

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between NetEase and Lizhan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Lizhan Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lizhan Environmental 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 Lizhan Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lizhan Environmental has no effect on the direction of NetEase i.e., NetEase and Lizhan Environmental go up and down completely randomly.

Pair Corralation between NetEase and Lizhan Environmental

If you would invest  8,458  in NetEase on October 26, 2024 and sell it today you would earn a total of  1,860  from holding NetEase or generate 21.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

NetEase  vs.  Lizhan Environmental

 Performance 
       Timeline  
NetEase 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 12 (%) 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.
Lizhan Environmental 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Lizhan Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lizhan Environmental is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

NetEase and Lizhan Environmental Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NetEase and Lizhan Environmental

The main advantage of trading using opposite NetEase and Lizhan Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetEase position performs unexpectedly, Lizhan Environmental 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 Lizhan Environmental will offset losses from the drop in Lizhan Environmental's long position.
The idea behind NetEase and Lizhan Environmental 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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