Correlation Between NetEase and MTN Group

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

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

Diversification Opportunities for NetEase and MTN Group

0.65

Correlation Coefficient

NetEase  MTN Group

Poor diversification

The 3 months correlation between NetEase and MTN is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and MTN Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group Limited 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 MTN Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group Limited has no effect on the direction of NetEase i.e., NetEase and MTN Group go up and down completely randomly.

Pair Corralation between NetEase and MTN Group

Given the investment horizon of 90 days NetEase is expected to generate 3.91 times less return on investment than MTN Group. But when comparing it to its historical volatility, NetEase is 1.85 times less risky than MTN Group. It trades about 0.08 of its potential returns per unit of risk. MTN Group Limited is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  448.00  in MTN Group Limited on December 19, 2024 and sell it today you would earn a total of  147.00  from holding MTN Group Limited or generate 32.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	77.97%
Values	Daily Returns

NetEase  vs.  MTN Group Limited

NetEase

Risk-Adjusted Performance

OK

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 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

MTN Group Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MTN Group Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, MTN Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NetEase and MTN Group

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

The idea behind NetEase and MTN Group Limited 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.