Correlation Between NetEase and Paradox Interactive

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

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

Diversification Opportunities for NetEase and Paradox Interactive

-0.13

Correlation Coefficient

NetEase  Paradox Interactive

Good diversification

The 3 months correlation between NetEase and Paradox is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and Paradox Interactive AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradox Interactive 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 Paradox Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradox Interactive has no effect on the direction of NetEase i.e., NetEase and Paradox Interactive go up and down completely randomly.

Pair Corralation between NetEase and Paradox Interactive

Given the investment horizon of 90 days NetEase is expected to generate 1.02 times more return on investment than Paradox Interactive. However, NetEase is 1.02 times more volatile than Paradox Interactive AB. It trades about 0.15 of its potential returns per unit of risk. Paradox Interactive AB is currently generating about -0.13 per unit of risk. If you would invest  10,582  in NetEase on May 13, 2025 and sell it today you would earn a total of  2,280  from holding NetEase or generate 21.55% return on investment over 90 days.

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

NetEase  vs.  Paradox Interactive AB

NetEase

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 11 (%) 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.

Paradox Interactive

Risk-Adjusted Performance

Weakest

Over the last 90 days Paradox Interactive AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in September 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with NetEase and Paradox Interactive

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

The idea behind NetEase and Paradox Interactive AB 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.