Correlation Between NetEase and PS Business

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Can any of the company-specific risk be diversified away by investing in both NetEase and PS Business 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 PS Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NetEase and PS Business Parks, you can compare the effects of market volatilities on NetEase and PS Business 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 PS Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetEase and PS Business.

Diversification Opportunities for NetEase and PS Business

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between NetEase and PSBXP is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and PS Business Parks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PS Business Parks 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 PS Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PS Business Parks has no effect on the direction of NetEase i.e., NetEase and PS Business go up and down completely randomly.

Pair Corralation between NetEase and PS Business

If you would invest  7,808  in NetEase on September 13, 2024 and sell it today you would earn a total of  1,882  from holding NetEase or generate 24.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy4.76%
ValuesDaily Returns

NetEase  vs.  PS Business Parks

 Performance 
       Timeline  
NetEase 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, NetEase unveiled solid returns over the last few months and may actually be approaching a breakup point.
PS Business Parks 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PS Business Parks has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PS Business is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

NetEase and PS Business Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NetEase and PS Business

The main advantage of trading using opposite NetEase and PS Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetEase position performs unexpectedly, PS Business 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 PS Business will offset losses from the drop in PS Business' long position.
The idea behind NetEase and PS Business Parks 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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