Correlation Between NetEase and NetEase

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

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

Diversification Opportunities for NetEase and NetEase

0.85

Correlation Coefficient

NetEase  NetEase

Very poor diversification

The 3 months correlation between NetEase and NetEase is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase 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 NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of NetEase i.e., NetEase and NetEase go up and down completely randomly.

Pair Corralation between NetEase and NetEase

Given the investment horizon of 90 days NetEase is expected to under-perform the NetEase. But the stock apears to be less risky and, when comparing its historical volatility, NetEase is 1.52 times less risky than NetEase. The stock trades about -0.03 of its potential returns per unit of risk. The NetEase is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,705  in NetEase on October 6, 2024 and sell it today you would earn a total of  244.00  from holding NetEase or generate 14.31% return on investment over 90 days.

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

NetEase  vs.  NetEase

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.

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. Despite nearly stable basic indicators, NetEase is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NetEase and NetEase

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

The idea behind NetEase and NetEase 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..