Correlation Between Netflix and AVE SA

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

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

Diversification Opportunities for Netflix and AVE SA

-0.47

Correlation Coefficient

Netflix  AVE SA

Very good diversification

The 3 months correlation between Netflix and AVE is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and AVE SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVE SA 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 AVE SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVE SA has no effect on the direction of Netflix i.e., Netflix and AVE SA go up and down completely randomly.

Pair Corralation between Netflix and AVE SA

Given the investment horizon of 90 days Netflix is expected to generate 0.91 times more return on investment than AVE SA. However, Netflix is 1.1 times less risky than AVE SA. It trades about 0.26 of its potential returns per unit of risk. AVE SA is currently generating about 0.03 per unit of risk. If you would invest  68,680  in Netflix on September 12, 2024 and sell it today you would earn a total of  24,976  from holding Netflix or generate 36.37% return on investment over 90 days.

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

Netflix  vs.  AVE SA

Netflix

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 20 (%) 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.

AVE SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AVE SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, AVE SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Netflix and AVE SA

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

The idea behind Netflix and AVE 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.