Correlation Between NetEase and NVIDIA

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

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

Diversification Opportunities for NetEase and NVIDIA

0.27

Correlation Coefficient

NetEase  NVIDIA

Modest diversification

The 3 months correlation between NetEase and NVIDIA is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding NetEase and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA 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 NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of NetEase i.e., NetEase and NVIDIA go up and down completely randomly.

Pair Corralation between NetEase and NVIDIA

Given the investment horizon of 90 days NetEase is expected to generate 1.02 times more return on investment than NVIDIA. However, NetEase is 1.02 times more volatile than NVIDIA. It trades about 0.09 of its potential returns per unit of risk. NVIDIA is currently generating about 0.04 per unit of risk. If you would invest  13,263  in NetEase on July 17, 2025 and sell it today you would earn a total of  1,336  from holding NetEase or generate 10.07% return on investment over 90 days.

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

NetEase  vs.  NVIDIA

NetEase

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in NetEase are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, NetEase may actually be approaching a critical reversion point that can send shares even higher in November 2025.

NVIDIA

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, NVIDIA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NetEase and NVIDIA

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

The idea behind NetEase and NVIDIA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.