Correlation Between APA and NetEase

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

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

Diversification Opportunities for APA and NetEase

0.81

Correlation Coefficient

APA  NetEase

Very poor diversification

The 3 months correlation between APA and NetEase is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase and APA 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 APA Corporation 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 APA i.e., APA and NetEase go up and down completely randomly.

Pair Corralation between APA and NetEase

Assuming the 90 days trading horizon APA is expected to generate 1.29 times less return on investment than NetEase. But when comparing it to its historical volatility, APA Corporation is 1.16 times less risky than NetEase. It trades about 0.16 of its potential returns per unit of risk. NetEase is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,784  in NetEase on April 22, 2025 and sell it today you would earn a total of  1,835  from holding NetEase or generate 31.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.83%
Values	Daily Returns

APA Corp.  vs.  NetEase

APA Corporation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in APA Corporation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, APA sustained solid returns over the last few months and may actually be approaching a breakup point.

NetEase

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NetEase sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APA and NetEase

The main advantage of trading using opposite APA and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APA 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 APA Corporation 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.