Correlation Between CONOCOPHILLIPS and NetEase

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

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

Diversification Opportunities for CONOCOPHILLIPS and NetEase

-0.25

Correlation Coefficient

CONOCOPHILLIPS  NetEase

Very good diversification

The 3 months correlation between CONOCOPHILLIPS and NetEase is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding CONOCOPHILLIPS CDA FDG and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and CONOCOPHILLIPS 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 CONOCOPHILLIPS CDA FDG 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 CONOCOPHILLIPS i.e., CONOCOPHILLIPS and NetEase go up and down completely randomly.

Pair Corralation between CONOCOPHILLIPS and NetEase

Assuming the 90 days trading horizon CONOCOPHILLIPS CDA FDG is expected to under-perform the NetEase. But the bond apears to be less risky and, when comparing its historical volatility, CONOCOPHILLIPS CDA FDG is 3.4 times less risky than NetEase. The bond trades about -0.13 of its potential returns per unit of risk. The NetEase is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,639  in NetEase on September 15, 2024 and sell it today you would earn a total of  1,906  from holding NetEase or generate 24.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	51.56%
Values	Daily Returns

CONOCOPHILLIPS CDA FDG  vs.  NetEase

CONOCOPHILLIPS CDA FDG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONOCOPHILLIPS CDA FDG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CONOCOPHILLIPS CDA FDG investors.

NetEase

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, NetEase unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CONOCOPHILLIPS and NetEase

The main advantage of trading using opposite CONOCOPHILLIPS and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CONOCOPHILLIPS 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 CONOCOPHILLIPS CDA FDG 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.