Correlation Between Meta Platforms and NetEase
Can any of the company-specific risk be diversified away by investing in both Meta Platforms 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 Meta Platforms and NetEase into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms and NetEase, you can compare the effects of market volatilities on Meta Platforms 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 Meta Platforms with a short position of NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and NetEase.
Diversification Opportunities for Meta Platforms and NetEase
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Meta and NetEase is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Meta Platforms 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 Meta Platforms 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 Meta Platforms i.e., Meta Platforms and NetEase go up and down completely randomly.
Pair Corralation between Meta Platforms and NetEase
Allowing for the 90-day total investment horizon Meta Platforms is expected to under-perform the NetEase. In addition to that, Meta Platforms is 1.7 times more volatile than NetEase. It trades about -0.08 of its total potential returns per unit of risk. NetEase is currently generating about 0.02 per unit of volatility. If you would invest 9,117 in NetEase on December 30, 2023 and sell it today you would earn a total of 1,230 from holding NetEase or generate 13.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 10.93% |
Values | Daily Returns |
Meta Platforms vs. NetEase
Performance |
Timeline |
Meta Platforms |
Risk-Adjusted Performance
0 of 100
Low | High |
Very Weak
NetEase |
Meta Platforms and NetEase Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Meta Platforms and NetEase
The main advantage of trading using opposite Meta Platforms and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms 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.Meta Platforms vs. Amgen Inc | Meta Platforms vs. Apogee Enterprises | Meta Platforms vs. Simpson Manufacturing | Meta Platforms vs. Western Digital |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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