Correlation Between NetEase and Verra Mobility

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

By analyzing existing cross correlation between NetEase and Verra Mobility Corp, you can compare the effects of market volatilities on NetEase and Verra Mobility 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 Verra Mobility. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetEase and Verra Mobility.

Diversification Opportunities for NetEase and Verra Mobility

0.03

Correlation Coefficient

NetEase  Verra Mobility

Significant diversification

The 3 months correlation between NetEase and Verra is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Verra Mobility Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verra Mobility Corp 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 Verra Mobility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verra Mobility Corp has no effect on the direction of NetEase i.e., NetEase and Verra Mobility go up and down completely randomly.

Pair Corralation between NetEase and Verra Mobility

Given the investment horizon of 90 days NetEase is expected to generate 1.61 times more return on investment than Verra Mobility. However, NetEase is 1.61 times more volatile than Verra Mobility Corp. It trades about 0.08 of its potential returns per unit of risk. Verra Mobility Corp is currently generating about -0.12 per unit of risk. If you would invest  8,009  in NetEase on September 22, 2024 and sell it today you would earn a total of  1,172  from holding NetEase or generate 14.63% return on investment over 90 days.

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

NetEase  vs.  Verra Mobility Corp

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.

Verra Mobility Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verra Mobility Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with NetEase and Verra Mobility

The main advantage of trading using opposite NetEase and Verra Mobility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetEase position performs unexpectedly, Verra Mobility 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 Verra Mobility will offset losses from the drop in Verra Mobility's long position.

The idea behind NetEase and Verra Mobility Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.