Correlation Between NetEase and Nexon Co

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

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

Diversification Opportunities for NetEase and Nexon Co

0.72

Correlation Coefficient

NetEase  Nexon Co

Poor diversification

The 3 months correlation between NetEase and Nexon is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Nexon Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexon Co 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 Nexon Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexon Co has no effect on the direction of NetEase i.e., NetEase and Nexon Co go up and down completely randomly.

Pair Corralation between NetEase and Nexon Co

Assuming the 90 days horizon NetEase is expected to generate 2.21 times more return on investment than Nexon Co. However, NetEase is 2.21 times more volatile than Nexon Co Ltd. It trades about 0.07 of its potential returns per unit of risk. Nexon Co Ltd is currently generating about 0.08 per unit of risk. If you would invest  2,177  in NetEase on May 2, 2025 and sell it today you would earn a total of  323.00  from holding NetEase or generate 14.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

NetEase  vs.  Nexon Co Ltd

NetEase

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, NetEase reported solid returns over the last few months and may actually be approaching a breakup point.

Nexon Co

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nexon Co Ltd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Nexon Co showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NetEase and Nexon Co

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

The idea behind NetEase and Nexon Co Ltd 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.