Correlation Between NetEase and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both NetEase and Algoma Steel 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 NetEase and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NetEase and Algoma Steel Group, you can compare the effects of market volatilities on NetEase and Algoma Steel 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 Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetEase and Algoma Steel.
Diversification Opportunities for NetEase and Algoma Steel
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between NetEase and Algoma is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Algoma Steel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Steel Group and NetEase 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 NetEase are associated (or correlated) with Algoma Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Steel Group has no effect on the direction of NetEase i.e., NetEase and Algoma Steel go up and down completely randomly.
Pair Corralation between NetEase and Algoma Steel
Given the investment horizon of 90 days NetEase is expected to generate 1.05 times more return on investment than Algoma Steel. However, NetEase is 1.05 times more volatile than Algoma Steel Group. It trades about 0.12 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.03 per unit of risk. If you would invest 8,070 in NetEase on August 31, 2024 and sell it today you would earn a total of 586.00 from holding NetEase or generate 7.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NetEase vs. Algoma Steel Group
Performance |
| Timeline |
| NetEase |
| Algoma Steel Group |
NetEase and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NetEase and Algoma Steel
The main advantage of trading using opposite NetEase and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetEase position performs unexpectedly, Algoma Steel 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 Algoma Steel will offset losses from the drop in Algoma Steel's long position.| NetEase vs. Roblox Corp | NetEase vs. Skillz Platform | NetEase vs. Take Two Interactive Software | NetEase vs. Nintendo Co ADR |
| Algoma Steel vs. Nucor Corp | Algoma Steel vs. Steel Dynamics | Algoma Steel vs. ArcelorMittal SA ADR | Algoma Steel vs. Gerdau SA 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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