Correlation Between NetEase and HealthEquity

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

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

Diversification Opportunities for NetEase and HealthEquity

0.53

Correlation Coefficient

NetEase  HealthEquity

Very weak diversification

The 3 months correlation between NetEase and HealthEquity is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and HealthEquity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthEquity 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 HealthEquity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HealthEquity has no effect on the direction of NetEase i.e., NetEase and HealthEquity go up and down completely randomly.

Pair Corralation between NetEase and HealthEquity

Given the investment horizon of 90 days NetEase is expected to under-perform the HealthEquity. In addition to that, NetEase is 1.43 times more volatile than HealthEquity. It trades about -0.22 of its total potential returns per unit of risk. HealthEquity is currently generating about 0.0 per unit of volatility. If you would invest  7,948  in HealthEquity on January 26, 2024 and sell it today you would lose (28.00) from holding HealthEquity or give up 0.35% of portfolio value over 90 days.

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

NetEase  vs.  HealthEquity

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.

HealthEquity

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HealthEquity are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, HealthEquity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NetEase and HealthEquity

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

The idea behind NetEase and HealthEquity 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.