Correlation Between Take Two and NetEase Inc

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

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

Diversification Opportunities for Take Two and NetEase Inc

0.22

Correlation Coefficient

Take Two  NetEase Inc

Modest diversification

The 3 months correlation between Take and NetEase Inc is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase Inc and Take Two 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 Take Two Interactive Software 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 Take Two i.e., Take Two and NetEase Inc go up and down completely randomly.

Pair Corralation between Take Two and NetEase Inc

Given the investment horizon of 90 days Take Two Interactive Software is expected to under-perform the NetEase Inc. But the stock apears to be less risky and, when comparing its historical volatility, Take Two Interactive Software is 5.25 times less risky than NetEase Inc. The stock trades about -0.04 of its potential returns per unit of risk. The NetEase is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,129  in NetEase on May 13, 2025 and sell it today you would earn a total of  625.00  from holding NetEase or generate 29.36% return on investment over 90 days.

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

Take Two Interactive Software  vs.  NetEase

Take Two Interactive

Risk-Adjusted Performance

Weakest

Over the last 90 days Take Two Interactive Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Take Two is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

NetEase Inc

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 7 (%) 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 Take Two and NetEase Inc

The main advantage of trading using opposite Take Two and NetEase Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Take Two 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 Take Two Interactive Software 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.