Correlation Between IGG and NetEase
Can any of the company-specific risk be diversified away by investing in both IGG 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 IGG and NetEase into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGG Inc and NetEase, you can compare the effects of market volatilities on IGG 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 IGG with a short position of NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGG and NetEase.
Diversification Opportunities for IGG and NetEase
Excellent diversification
The 3 months correlation between IGG and NetEase is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding IGG Inc and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and IGG 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 IGG Inc 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 IGG i.e., IGG and NetEase go up and down completely randomly.
Pair Corralation between IGG and NetEase
Assuming the 90 days horizon IGG Inc is expected to generate 2.09 times more return on investment than NetEase. However, IGG is 2.09 times more volatile than NetEase. It trades about 0.13 of its potential returns per unit of risk. NetEase is currently generating about 0.12 per unit of risk. If you would invest 28.00 in IGG Inc on November 2, 2024 and sell it today you would earn a total of 25.00 from holding IGG Inc or generate 89.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IGG Inc vs. NetEase
Performance |
| Timeline |
| IGG Inc |
| NetEase |
IGG and NetEase Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGG and NetEase
The main advantage of trading using opposite IGG and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGG 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.The idea behind IGG Inc and NetEase 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.| NetEase vs. Roblox Corp | NetEase vs. Skillz Platform | NetEase vs. Take Two Interactive Software | NetEase vs. Nintendo Co ADR |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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