diversifiable risk of combining NetEase and UbiSoft Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NetEase and UbiSoft Entertainment, you can compare the effects of market volatilities on NetEase and UbiSoft Entertainment 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 UbiSoft Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetEase and UbiSoft Entertainment.
Diversification Opportunities for NetEase and UbiSoft Entertainment
Pair Corralation between NetEase and UbiSoft Entertainment
Given the investment horizon of 90 days NetEase is expected to generate 1.33 times less return on investment than UbiSoft Entertainment. But when comparing it to its historical volatility, NetEase is 1.4 times less risky than UbiSoft Entertainment. It trades about 0.18 of its potential returns per unit of risk. UbiSoft Entertainment is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 440.00 in UbiSoft Entertainment on November 24, 2023 and sell it today you would earn a total of 52.00 from holding UbiSoft Entertainment or generate 11.82% return on investment over 90 days.
NetEase vs. UbiSoft Entertainment
NetEase and UbiSoft Entertainment Volatility Contrast
Pair Trading with NetEase and UbiSoft EntertainmentThe main advantage of trading using opposite NetEase and UbiSoft Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetEase position performs unexpectedly, UbiSoft Entertainment 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 UbiSoft Entertainment will offset losses from the drop in UbiSoft Entertainment's long position. The idea behind NetEase and UbiSoft Entertainment 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.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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