Correlation Between NetEase and ALLSTATE

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

By analyzing existing cross correlation between NetEase and ALLSTATE P 535, you can compare the effects of market volatilities on NetEase and ALLSTATE 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 ALLSTATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetEase and ALLSTATE.

Diversification Opportunities for NetEase and ALLSTATE

0.18

Correlation Coefficient

NetEase  ALLSTATE

Average diversification

The 3 months correlation between NetEase and ALLSTATE is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and ALLSTATE P 535 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLSTATE P 535 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 ALLSTATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALLSTATE P 535 has no effect on the direction of NetEase i.e., NetEase and ALLSTATE go up and down completely randomly.

Pair Corralation between NetEase and ALLSTATE

Given the investment horizon of 90 days NetEase is expected to generate 2.89 times more return on investment than ALLSTATE. However, NetEase is 2.89 times more volatile than ALLSTATE P 535. It trades about 0.07 of its potential returns per unit of risk. ALLSTATE P 535 is currently generating about 0.04 per unit of risk. If you would invest  9,231  in NetEase on December 25, 2024 and sell it today you would earn a total of  743.00  from holding NetEase or generate 8.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.33%
Values	Daily Returns

NetEase  vs.  ALLSTATE P 535

NetEase

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 5 (%) 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.

ALLSTATE P 535

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ALLSTATE P 535 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ALLSTATE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NetEase and ALLSTATE

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

The idea behind NetEase and ALLSTATE P 535 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.