Correlation Between Freeport and NetEase

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Can any of the company-specific risk be diversified away by investing in both Freeport 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 Freeport and NetEase into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freeport McMoRan 455 percent and NetEase, you can compare the effects of market volatilities on Freeport 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 Freeport with a short position of NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport and NetEase.

Diversification Opportunities for Freeport and NetEase

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Freeport and NetEase is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan 455 percent and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Freeport 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 Freeport McMoRan 455 percent 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 Freeport i.e., Freeport and NetEase go up and down completely randomly.

Pair Corralation between Freeport and NetEase

Assuming the 90 days trading horizon Freeport McMoRan 455 percent is expected to under-perform the NetEase. But the bond apears to be less risky and, when comparing its historical volatility, Freeport McMoRan 455 percent is 17.5 times less risky than NetEase. The bond trades about -0.14 of its potential returns per unit of risk. The NetEase is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,906  in NetEase on September 19, 2024 and sell it today you would earn a total of  1,385  from holding NetEase or generate 17.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy60.94%
ValuesDaily Returns

Freeport McMoRan 455 percent  vs.  NetEase

 Performance 
       Timeline  
Freeport McMoRan 455 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Freeport McMoRan 455 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
NetEase 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 7 (%) 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.

Freeport and NetEase Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Freeport and NetEase

The main advantage of trading using opposite Freeport and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport 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 Freeport McMoRan 455 percent 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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