Correlation Between Netflix and Adolfo Dominguez

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

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

Diversification Opportunities for Netflix and Adolfo Dominguez

0.61

Correlation Coefficient

Netflix  Adolfo Dominguez

Poor diversification

The 3 months correlation between Netflix and Adolfo is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Adolfo Dominguez SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adolfo Dominguez 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 Adolfo Dominguez. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adolfo Dominguez has no effect on the direction of Netflix i.e., Netflix and Adolfo Dominguez go up and down completely randomly.

Pair Corralation between Netflix and Adolfo Dominguez

Given the investment horizon of 90 days Netflix is expected to generate 1.26 times more return on investment than Adolfo Dominguez. However, Netflix is 1.26 times more volatile than Adolfo Dominguez SA. It trades about 0.23 of its potential returns per unit of risk. Adolfo Dominguez SA is currently generating about 0.06 per unit of risk. If you would invest  68,362  in Netflix on September 5, 2024 and sell it today you would earn a total of  21,855  from holding Netflix or generate 31.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Netflix  vs.  Adolfo Dominguez SA

Netflix

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 18 (%) 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.

Adolfo Dominguez

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Adolfo Dominguez SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Adolfo Dominguez is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Netflix and Adolfo Dominguez

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

The idea behind Netflix and Adolfo Dominguez SA 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.