Correlation Between NetEase and GMS
Can any of the company-specific risk be diversified away by investing in both NetEase and GMS 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 GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NetEase and GMS Inc, you can compare the effects of market volatilities on NetEase and GMS 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 GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetEase and GMS.
Diversification Opportunities for NetEase and GMS
Average diversification
The 3 months correlation between NetEase and GMS is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc 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 GMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMS Inc has no effect on the direction of NetEase i.e., NetEase and GMS go up and down completely randomly.
Pair Corralation between NetEase and GMS
Given the investment horizon of 90 days NetEase is expected to generate 1.54 times more return on investment than GMS. However, NetEase is 1.54 times more volatile than GMS Inc. It trades about 0.23 of its potential returns per unit of risk. GMS Inc is currently generating about 0.28 per unit of risk. If you would invest 7,904 in NetEase on September 5, 2024 and sell it today you would earn a total of 1,175 from holding NetEase or generate 14.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NetEase vs. GMS Inc
Performance |
| Timeline |
| NetEase |
| GMS Inc |
NetEase and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NetEase and GMS
The main advantage of trading using opposite NetEase and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetEase position performs unexpectedly, GMS 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 GMS will offset losses from the drop in GMS's long position.| NetEase vs. Roblox Corp | NetEase vs. Skillz Platform | NetEase vs. Take Two Interactive Software | NetEase vs. Nintendo Co ADR |
| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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