Correlation Between NetEase and Western Digital
Can any of the company-specific risk be diversified away by investing in both NetEase and Western Digital 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 Western Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NetEase and Western Digital, you can compare the effects of market volatilities on NetEase and Western Digital 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 Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetEase and Western Digital.
Diversification Opportunities for NetEase and Western Digital
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NetEase and Western is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 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 Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of NetEase i.e., NetEase and Western Digital go up and down completely randomly.
Pair Corralation between NetEase and Western Digital
Given the investment horizon of 90 days NetEase is expected to generate 2.05 times less return on investment than Western Digital. In addition to that, NetEase is 1.01 times more volatile than Western Digital. It trades about 0.03 of its total potential returns per unit of risk. Western Digital is currently generating about 0.07 per unit of volatility. If you would invest 3,630 in Western Digital on September 3, 2024 and sell it today you would earn a total of 3,669 from holding Western Digital or generate 101.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NetEase vs. Western Digital
Performance |
| Timeline |
| NetEase |
| Western Digital |
NetEase and Western Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NetEase and Western Digital
The main advantage of trading using opposite NetEase and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetEase position performs unexpectedly, Western Digital 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 Western Digital will offset losses from the drop in Western Digital's long position.| NetEase vs. Roblox Corp | NetEase vs. Skillz Platform | NetEase vs. Take Two Interactive Software | NetEase vs. Nintendo Co ADR |
| Western Digital vs. NetApp Inc | Western Digital vs. Logitech International SA | Western Digital vs. HP Inc | Western Digital vs. Dell Technologies |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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