Correlation Between TuanChe ADR and NetEase

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

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

Diversification Opportunities for TuanChe ADR and NetEase

0.82

Correlation Coefficient

TuanChe ADR  NetEase

Very poor diversification

The 3 months correlation between TuanChe and NetEase is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding TuanChe ADR and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and TuanChe ADR 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 TuanChe ADR 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 TuanChe ADR i.e., TuanChe ADR and NetEase go up and down completely randomly.

Pair Corralation between TuanChe ADR and NetEase

Allowing for the 90-day total investment horizon TuanChe ADR is expected to generate 2.05 times more return on investment than NetEase. However, TuanChe ADR is 2.05 times more volatile than NetEase. It trades about 0.15 of its potential returns per unit of risk. NetEase is currently generating about 0.22 per unit of risk. If you would invest  53.00  in TuanChe ADR on April 20, 2025 and sell it today you would earn a total of  24.00  from holding TuanChe ADR or generate 45.28% return on investment over 90 days.

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

TuanChe ADR  vs.  NetEase

TuanChe ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TuanChe ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, TuanChe ADR exhibited solid returns over the last few months and may actually be approaching a breakup point.

NetEase

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 16 (%) 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.

Pair Trading with TuanChe ADR and NetEase

The main advantage of trading using opposite TuanChe ADR and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TuanChe ADR 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 TuanChe ADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.