Correlation Between The9 and 191216DE7

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Can any of the company-specific risk be diversified away by investing in both The9 and 191216DE7 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 191216DE7 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 COCA COLA CO, you can compare the effects of market volatilities on The9 and 191216DE7 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 191216DE7. Check out your portfolio center. Please also check ongoing floating volatility patterns of The9 and 191216DE7.

Diversification Opportunities for The9 and 191216DE7

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between The9 and 191216DE7 is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding The9 Ltd ADR and COCA COLA CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A CO 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 191216DE7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A CO has no effect on the direction of The9 i.e., The9 and 191216DE7 go up and down completely randomly.

Pair Corralation between The9 and 191216DE7

Given the investment horizon of 90 days The9 Ltd ADR is expected to generate 6.6 times more return on investment than 191216DE7. However, The9 is 6.6 times more volatile than COCA COLA CO. It trades about 0.47 of its potential returns per unit of risk. COCA COLA CO is currently generating about -0.15 per unit of risk. If you would invest  829.00  in The9 Ltd ADR on September 1, 2024 and sell it today you would earn a total of  646.00  from holding The9 Ltd ADR or generate 77.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

The9 Ltd ADR  vs.  COCA COLA CO

 Performance 
       Timeline  
The9 Ltd ADR 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in The9 Ltd ADR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, The9 showed solid returns over the last few months and may actually be approaching a breakup point.
COCA A CO 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days COCA COLA CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 191216DE7 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

The9 and 191216DE7 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with The9 and 191216DE7

The main advantage of trading using opposite The9 and 191216DE7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The9 position performs unexpectedly, 191216DE7 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 191216DE7 will offset losses from the drop in 191216DE7's long position.
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The idea behind The9 Ltd ADR and COCA COLA CO 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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