Correlation Between Next Technology and NetEase Inc

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

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

Diversification Opportunities for Next Technology and NetEase Inc

0.06

Correlation Coefficient

Next Technology  NetEase Inc

Significant diversification

The 3 months correlation between Next and NetEase Inc is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Next Technology Holding and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase Inc and Next Technology 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 Next Technology Holding are associated (or correlated) with NetEase Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase Inc has no effect on the direction of Next Technology i.e., Next Technology and NetEase Inc go up and down completely randomly.

Pair Corralation between Next Technology and NetEase Inc

Given the investment horizon of 90 days Next Technology Holding is expected to generate 2.85 times more return on investment than NetEase Inc. However, Next Technology is 2.85 times more volatile than NetEase. It trades about 0.03 of its potential returns per unit of risk. NetEase is currently generating about 0.05 per unit of risk. If you would invest  198.00  in Next Technology Holding on May 21, 2025 and sell it today you would lose (86.00) from holding Next Technology Holding or give up 43.43% of portfolio value over 90 days.

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

Next Technology Holding  vs.  NetEase

Next Technology Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Next Technology Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Next Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

NetEase Inc

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, NetEase Inc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Next Technology and NetEase Inc

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

The idea behind Next Technology Holding 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.