Correlation Between Zane Interactive and NetEase

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

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

Diversification Opportunities for Zane Interactive and NetEase

0.0

Correlation Coefficient

Zane Interactive  NetEase

Pay attention - limited upside

The 3 months correlation between Zane and NetEase is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Zane Interactive Publishing and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Zane Interactive 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 Zane Interactive Publishing 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 Zane Interactive i.e., Zane Interactive and NetEase go up and down completely randomly.

Pair Corralation between Zane Interactive and NetEase

Given the investment horizon of 90 days Zane Interactive Publishing is expected to under-perform the NetEase. In addition to that, Zane Interactive is 1.79 times more volatile than NetEase. It trades about -0.04 of its total potential returns per unit of risk. NetEase is currently generating about 0.03 per unit of volatility. If you would invest  7,318  in NetEase on September 23, 2024 and sell it today you would earn a total of  1,891  from holding NetEase or generate 25.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Zane Interactive Publishing  vs.  NetEase

Zane Interactive Pub

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zane Interactive Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Zane Interactive is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Zane Interactive and NetEase

The main advantage of trading using opposite Zane Interactive and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zane Interactive 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 Zane Interactive Publishing 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.