Correlation Between Vestis and NetEase

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

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

Diversification Opportunities for Vestis and NetEase

0.45

Correlation Coefficient

Vestis  NetEase

Very weak diversification

The 3 months correlation between Vestis and NetEase is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vestis and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Vestis 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 Vestis 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 Vestis i.e., Vestis and NetEase go up and down completely randomly.

Pair Corralation between Vestis and NetEase

Given the investment horizon of 90 days Vestis is expected to generate 2.55 times less return on investment than NetEase. In addition to that, Vestis is 1.08 times more volatile than NetEase. It trades about 0.04 of its total potential returns per unit of risk. NetEase is currently generating about 0.12 per unit of volatility. If you would invest  8,088  in NetEase on September 21, 2024 and sell it today you would earn a total of  1,093  from holding NetEase or generate 13.51% return on investment over 90 days.

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

Vestis  vs.  NetEase

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.

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.

Pair Trading with Vestis and NetEase

The main advantage of trading using opposite Vestis and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestis 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 Vestis 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.