Correlation Between Ihuman and NetEase

Can any of the company-specific risk be diversified away by investing in both Ihuman 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 Ihuman and NetEase into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ihuman Inc and NetEase, you can compare the effects of market volatilities on Ihuman 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 Ihuman with a short position of NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ihuman and NetEase.

Diversification Opportunities for Ihuman and NetEase

0.42

Correlation Coefficient

Ihuman  NetEase

Very weak diversification

The 3 months correlation between Ihuman and NetEase is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ihuman Inc and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Ihuman 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 Ihuman Inc 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 Ihuman i.e., Ihuman and NetEase go up and down completely randomly.

Pair Corralation between Ihuman and NetEase

Allowing for the 90-day total investment horizon Ihuman Inc is expected to generate 0.77 times more return on investment than NetEase. However, Ihuman Inc is 1.3 times less risky than NetEase. It trades about 0.29 of its potential returns per unit of risk. NetEase is currently generating about 0.08 per unit of risk. If you would invest  155.00  in Ihuman Inc on September 22, 2024 and sell it today you would earn a total of  21.00  from holding Ihuman Inc or generate 13.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ihuman Inc  vs.  NetEase

Ihuman Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ihuman Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, Ihuman demonstrated solid returns over the last few months and may actually be approaching a breakup point.

NetEase

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 6 (%) 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.

Pair Trading with Ihuman and NetEase

The main advantage of trading using opposite Ihuman and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ihuman 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.

The idea behind Ihuman Inc and NetEase 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.