Correlation Between NetEase and ResMed
Can any of the company-specific risk be diversified away by investing in both NetEase and ResMed 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 ResMed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NetEase and ResMed Inc, you can compare the effects of market volatilities on NetEase and ResMed 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 ResMed. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetEase and ResMed.
Diversification Opportunities for NetEase and ResMed
Weak diversification
The 3 months correlation between NetEase and ResMed is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc 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 ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of NetEase i.e., NetEase and ResMed go up and down completely randomly.
Pair Corralation between NetEase and ResMed
Given the investment horizon of 90 days NetEase is expected to generate 1.13 times more return on investment than ResMed. However, NetEase is 1.13 times more volatile than ResMed Inc. It trades about 0.03 of its potential returns per unit of risk. ResMed Inc is currently generating about 0.02 per unit of risk. If you would invest 9,000 in NetEase on January 20, 2024 and sell it today you would earn a total of 250.00 from holding NetEase or generate 2.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
NetEase vs. ResMed Inc
Performance |
| Timeline |
| NetEase |
| ResMed Inc |
NetEase and ResMed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NetEase and ResMed
The main advantage of trading using opposite NetEase and ResMed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetEase position performs unexpectedly, ResMed 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 ResMed will offset losses from the drop in ResMed's long position.The idea behind NetEase and ResMed Inc 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.| ResMed vs. Agilent Technologies | ResMed vs. Illumina | ResMed vs. Waters | ResMed vs. Thermo Fisher Scientific |
Check out your portfolio center.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 Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |