Correlation Between Connected Media and NetEase

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

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

Diversification Opportunities for Connected Media and NetEase

0.0

Correlation Coefficient

Connected Media  NetEase

Pay attention - limited upside

The 3 months correlation between Connected and NetEase is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Connected Media Tech and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Connected Media 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 Connected Media Tech 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 Connected Media i.e., Connected Media and NetEase go up and down completely randomly.

Pair Corralation between Connected Media and NetEase

If you would invest  10,920  in NetEase on May 3, 2025 and sell it today you would earn a total of  2,110  from holding NetEase or generate 19.32% return on investment over 90 days.

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

Connected Media Tech  vs.  NetEase

Connected Media Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Connected Media Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Connected Media is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

NetEase

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 10 (%) 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 Connected Media and NetEase

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

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.