Correlation Between Vodka Brands and NetEase

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

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

Diversification Opportunities for Vodka Brands and NetEase

0.69

Correlation Coefficient

Vodka Brands  NetEase

Poor diversification

The 3 months correlation between Vodka and NetEase is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vodka Brands Corp and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Vodka Brands 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 Vodka Brands Corp 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 Vodka Brands i.e., Vodka Brands and NetEase go up and down completely randomly.

Pair Corralation between Vodka Brands and NetEase

Given the investment horizon of 90 days Vodka Brands is expected to generate 1.39 times less return on investment than NetEase. In addition to that, Vodka Brands is 1.33 times more volatile than NetEase. It trades about 0.05 of its total potential returns per unit of risk. NetEase is currently generating about 0.09 per unit of volatility. If you would invest  9,209  in NetEase on December 20, 2024 and sell it today you would earn a total of  982.00  from holding NetEase or generate 10.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.16%
Values	Daily Returns

Vodka Brands Corp  vs.  NetEase

Vodka Brands Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vodka Brands Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, Vodka Brands may actually be approaching a critical reversion point that can send shares even higher in April 2025.

NetEase

Risk-Adjusted Performance

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

Pair Trading with Vodka Brands and NetEase

The main advantage of trading using opposite Vodka Brands and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodka Brands 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 Vodka Brands Corp 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..