Correlation Between Digi International and NetEase

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

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

Diversification Opportunities for Digi International and NetEase

0.41

Correlation Coefficient

Digi International  NetEase

Very weak diversification

The 3 months correlation between Digi and NetEase is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and Digi International 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 Digi International 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 Digi International i.e., Digi International and NetEase go up and down completely randomly.

Pair Corralation between Digi International and NetEase

Given the investment horizon of 90 days Digi International is expected to under-perform the NetEase. In addition to that, Digi International is 1.19 times more volatile than NetEase. It trades about -0.02 of its total potential returns per unit of risk. NetEase is currently generating about 0.1 per unit of volatility. If you would invest  11,845  in NetEase on May 19, 2025 and sell it today you would earn a total of  1,077  from holding NetEase or generate 9.09% return on investment over 90 days.

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

Digi International  vs.  NetEase

Digi International

Risk-Adjusted Performance

Weakest

Over the last 90 days Digi International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Digi International is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

NetEase

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, NetEase may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Digi International and NetEase

The main advantage of trading using opposite Digi International and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digi International 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 Digi International 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..