Correlation Between NetEase and Vestis

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

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

Diversification Opportunities for NetEase and Vestis

0.45

Correlation Coefficient

NetEase  Vestis

Very weak diversification

The 3 months correlation between NetEase and Vestis is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Vestis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestis 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 Vestis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestis has no effect on the direction of NetEase i.e., NetEase and Vestis go up and down completely randomly.

Pair Corralation between NetEase and Vestis

Given the investment horizon of 90 days NetEase is expected to generate 2.9 times less return on investment than Vestis. But when comparing it to its historical volatility, NetEase is 1.41 times less risky than Vestis. It trades about 0.1 of its potential returns per unit of risk. Vestis is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,328  in Vestis on September 21, 2024 and sell it today you would earn a total of  231.00  from holding Vestis or generate 17.39% return on investment over 90 days.

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

NetEase  vs.  Vestis

NetEase

Risk-Adjusted Performance

6 of 100

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.

Vestis

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vestis are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vestis is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NetEase and Vestis

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

The idea behind NetEase and Vestis 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.