Correlation Between Netflix and Materials Portfolio
Can any of the company-specific risk be diversified away by investing in both Netflix and Materials Portfolio 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 Materials Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Materials Portfolio Fidelity, you can compare the effects of market volatilities on Netflix and Materials Portfolio 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 Materials Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Materials Portfolio.
Diversification Opportunities for Netflix and Materials Portfolio
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Netflix and Materials is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Materials Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Portfolio 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 Materials Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Portfolio has no effect on the direction of Netflix i.e., Netflix and Materials Portfolio go up and down completely randomly.
Pair Corralation between Netflix and Materials Portfolio
Given the investment horizon of 90 days Netflix is expected to generate 1.93 times more return on investment than Materials Portfolio. However, Netflix is 1.93 times more volatile than Materials Portfolio Fidelity. It trades about 0.11 of its potential returns per unit of risk. Materials Portfolio Fidelity is currently generating about 0.01 per unit of risk. If you would invest 32,622 in Netflix on September 6, 2024 and sell it today you would earn a total of 58,484 from holding Netflix or generate 179.28% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Netflix vs. Materials Portfolio Fidelity
Performance |
Timeline |
Netflix |
Materials Portfolio |
Netflix and Materials Portfolio Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Netflix and Materials Portfolio
The main advantage of trading using opposite Netflix and Materials Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Materials Portfolio 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 Materials Portfolio will offset losses from the drop in Materials Portfolio's long position.Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
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Check out your portfolio center.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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