Correlation Between NetEase and Founder Group

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

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

Diversification Opportunities for NetEase and Founder Group

-0.82

Correlation Coefficient

NetEase  Founder Group

Pay attention - limited upside

The 3 months correlation between NetEase and Founder is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Founder Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Founder Group Limited 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 Founder Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Founder Group Limited has no effect on the direction of NetEase i.e., NetEase and Founder Group go up and down completely randomly.

Pair Corralation between NetEase and Founder Group

Given the investment horizon of 90 days NetEase is expected to generate 0.42 times more return on investment than Founder Group. However, NetEase is 2.4 times less risky than Founder Group. It trades about 0.13 of its potential returns per unit of risk. Founder Group Limited is currently generating about -0.01 per unit of risk. 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	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

NetEase  vs.  Founder Group Limited

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.

Founder Group Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Founder Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Founder Group is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with NetEase and Founder Group

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

The idea behind NetEase and Founder Group Limited 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.