Correlation Between FactSet Research and Netflix

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

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

Diversification Opportunities for FactSet Research and Netflix

0.79

Correlation Coefficient

FactSet Research  Netflix

Poor diversification

The 3 months correlation between FactSet and Netflix is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding FactSet Research Systems and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and FactSet Research 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 FactSet Research Systems are associated (or correlated) with Netflix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netflix has no effect on the direction of FactSet Research i.e., FactSet Research and Netflix go up and down completely randomly.

Pair Corralation between FactSet Research and Netflix

Considering the 90-day investment horizon FactSet Research is expected to generate 1.93 times less return on investment than Netflix. But when comparing it to its historical volatility, FactSet Research Systems is 1.6 times less risky than Netflix. It trades about 0.18 of its potential returns per unit of risk. Netflix is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  67,532  in Netflix on August 31, 2024 and sell it today you would earn a total of  20,202  from holding Netflix or generate 29.91% return on investment over 90 days.

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

FactSet Research Systems  vs.  Netflix

FactSet Research Systems

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FactSet Research Systems are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, FactSet Research unveiled solid returns over the last few months and may actually be approaching a breakup point.

Netflix

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FactSet Research and Netflix

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

The idea behind FactSet Research Systems and Netflix 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.