Correlation Between Gravity and NetEase
Can any of the company-specific risk be diversified away by investing in both Gravity and NetEase 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 Gravity and NetEase into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gravity Co and NetEase, you can compare the effects of market volatilities on Gravity and NetEase 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 Gravity with a short position of NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gravity and NetEase.
Diversification Opportunities for Gravity and NetEase
Very good diversification
The 3 months correlation between Gravity and NetEase is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Gravity Co and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Gravity 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 Gravity Co are associated (or correlated) with NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of Gravity i.e., Gravity and NetEase go up and down completely randomly.
Pair Corralation between Gravity and NetEase
Given the investment horizon of 90 days Gravity is expected to generate 1.2 times less return on investment than NetEase. But when comparing it to its historical volatility, Gravity Co is 1.4 times less risky than NetEase. It trades about 0.11 of its potential returns per unit of risk. NetEase is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 8,108 in NetEase on August 28, 2024 and sell it today you would earn a total of 432.00 from holding NetEase or generate 5.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gravity Co vs. NetEase
Performance |
| Timeline |
| Gravity |
| NetEase |
Gravity and NetEase Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gravity and NetEase
The main advantage of trading using opposite Gravity and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gravity position performs unexpectedly, NetEase 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 NetEase will offset losses from the drop in NetEase's long position.| Gravity vs. Doubledown Interactive Co | Gravity vs. Playtika Holding Corp | Gravity vs. NetEase | Gravity vs. SohuCom |
| NetEase vs. Playstudios | NetEase vs. Talkspace | NetEase vs. Katapult Holdings Equity | NetEase vs. Aquagold International |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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