Correlation Between NetEase and Playstudios

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

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

Diversification Opportunities for NetEase and Playstudios

0.13

Correlation Coefficient

NetEase  Playstudios

Average diversification

The 3 months correlation between NetEase and Playstudios is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Playstudios in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playstudios 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 Playstudios. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playstudios has no effect on the direction of NetEase i.e., NetEase and Playstudios go up and down completely randomly.

Pair Corralation between NetEase and Playstudios

Given the investment horizon of 90 days NetEase is expected to generate 0.76 times more return on investment than Playstudios. However, NetEase is 1.31 times less risky than Playstudios. It trades about 0.01 of its potential returns per unit of risk. Playstudios is currently generating about -0.08 per unit of risk. If you would invest  9,265  in NetEase on March 17, 2024 and sell it today you would lose (11.00) from holding NetEase or give up 0.12% of portfolio value over 90 days.

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

NetEase  vs.  Playstudios

NetEase

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NetEase has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Playstudios

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Playstudios has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Playstudios 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 Playstudios

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

The idea behind NetEase and Playstudios 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.