Correlation Between The9 and Network CN
Can any of the company-specific risk be diversified away by investing in both The9 and Network CN 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 The9 and Network CN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The9 Ltd ADR and Network CN, you can compare the effects of market volatilities on The9 and Network CN 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 The9 with a short position of Network CN. Check out your portfolio center. Please also check ongoing floating volatility patterns of The9 and Network CN.
Diversification Opportunities for The9 and Network CN
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between The9 and Network is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding The9 Ltd ADR and Network CN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network CN and The9 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 The9 Ltd ADR are associated (or correlated) with Network CN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network CN has no effect on the direction of The9 i.e., The9 and Network CN go up and down completely randomly.
Pair Corralation between The9 and Network CN
Given the investment horizon of 90 days The9 is expected to generate 29.91 times less return on investment than Network CN. But when comparing it to its historical volatility, The9 Ltd ADR is 23.78 times less risky than Network CN. It trades about 0.13 of its potential returns per unit of risk. Network CN is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Network CN on September 3, 2024 and sell it today you would earn a total of 61.00 from holding Network CN or generate 1525.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.4% |
| Values | Daily Returns |
The9 Ltd ADR vs. Network CN
Performance |
| Timeline |
| The9 Ltd ADR |
| Network CN |
The9 and Network CN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The9 and Network CN
The main advantage of trading using opposite The9 and Network CN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The9 position performs unexpectedly, Network CN 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 Network CN will offset losses from the drop in Network CN's long position.The idea behind The9 Ltd ADR and Network CN 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.| Network CN vs. Data3 Limited | Network CN vs. RBC Bearings Incorporated | Network CN vs. Weyco Group | Network CN vs. Cadence Design Systems |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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