Correlation Between ARCA Oil and NetEase
Can any of the company-specific risk be diversified away by investing in both ARCA Oil and NetEase 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 ARCA Oil and NetEase into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARCA Oil and NetEase, you can compare the effects of market volatilities on ARCA Oil and NetEase 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 ARCA Oil with a short position of NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARCA Oil and NetEase.
Diversification Opportunities for ARCA Oil and NetEase
Good diversification
The 3 months correlation between ARCA and NetEase is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding ARCA Oil and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and ARCA Oil 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 ARCA Oil are associated (or correlated) with NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of ARCA Oil i.e., ARCA Oil and NetEase go up and down completely randomly.
Pair Corralation between ARCA Oil and NetEase
Assuming the 90 days trading horizon ARCA Oil is expected to generate 5.66 times less return on investment than NetEase. But when comparing it to its historical volatility, ARCA Oil is 1.79 times less risky than NetEase. It trades about 0.0 of its potential returns per unit of risk. NetEase is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 8,471 in NetEase on October 9, 2024 and sell it today you would earn a total of 351.00 from holding NetEase or generate 4.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARCA Oil vs. NetEase
Performance |
| Timeline |
ARCA Oil and NetEase Volatility Contrast
Predicted Return Density |
| Returns |
ARCA Oil
Pair trading matchups for ARCA Oil
NetEase
Pair trading matchups for NetEase
Pair Trading with ARCA Oil and NetEase
The main advantage of trading using opposite ARCA Oil and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARCA Oil position performs unexpectedly, NetEase 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 NetEase will offset losses from the drop in NetEase's long position.| ARCA Oil vs. Crimson Wine | ARCA Oil vs. Brandywine Realty Trust | ARCA Oil vs. Sonida Senior Living | ARCA Oil vs. Aperture Health |
| NetEase vs. Roblox Corp | NetEase vs. Skillz Platform | NetEase vs. Take Two Interactive Software | NetEase vs. Nintendo Co 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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