Correlation Between Netflix and Cabot Oil

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

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

Diversification Opportunities for Netflix and Cabot Oil

0.86

Correlation Coefficient

Netflix  Cabot Oil

Very poor diversification

The 3 months correlation between Netflix and Cabot is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Cabot Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot Oil Gas and Netflix 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 Netflix are associated (or correlated) with Cabot Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot Oil Gas has no effect on the direction of Netflix i.e., Netflix and Cabot Oil go up and down completely randomly.

Pair Corralation between Netflix and Cabot Oil

Assuming the 90 days trading horizon Netflix is expected to generate 1.28 times more return on investment than Cabot Oil. However, Netflix is 1.28 times more volatile than Cabot Oil Gas. It trades about 0.25 of its potential returns per unit of risk. Cabot Oil Gas is currently generating about 0.17 per unit of risk. If you would invest  1,340,000  in Netflix on September 3, 2024 and sell it today you would earn a total of  491,800  from holding Netflix or generate 36.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Netflix  vs.  Cabot Oil Gas

Netflix

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Cabot Oil Gas

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cabot Oil Gas are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Cabot Oil showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and Cabot Oil

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

The idea behind Netflix and Cabot Oil Gas 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.