Correlation Between NetEase and Charter Communications

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

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

Diversification Opportunities for NetEase and Charter Communications

-0.14

Correlation Coefficient

NetEase  Charter Communications

Good diversification

The 3 months correlation between NetEase and Charter is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications 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 Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of NetEase i.e., NetEase and Charter Communications go up and down completely randomly.

Pair Corralation between NetEase and Charter Communications

Given the investment horizon of 90 days NetEase is expected to generate 1.38 times more return on investment than Charter Communications. However, NetEase is 1.38 times more volatile than Charter Communications. It trades about -0.19 of its potential returns per unit of risk. Charter Communications is currently generating about -0.28 per unit of risk. If you would invest  10,352  in NetEase on January 24, 2024 and sell it today you would lose (864.00) from holding NetEase or give up 8.35% of portfolio value over 90 days.

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

NetEase  vs.  Charter Communications

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 comparatively stable technical and fundamental indicators, NetEase is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Charter Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charter Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with NetEase and Charter Communications

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

The idea behind NetEase and Charter Communications 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.