Correlation Between Netflix and FUJITSU

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

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

Diversification Opportunities for Netflix and FUJITSU

-0.49

Correlation Coefficient

Netflix  FUJITSU

Very good diversification

The 3 months correlation between Netflix and FUJITSU is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and FUJITSU LTD ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUJITSU LTD ADR 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 FUJITSU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUJITSU LTD ADR has no effect on the direction of Netflix i.e., Netflix and FUJITSU go up and down completely randomly.

Pair Corralation between Netflix and FUJITSU

Given the investment horizon of 90 days Netflix is expected to generate 0.95 times more return on investment than FUJITSU. However, Netflix is 1.05 times less risky than FUJITSU. It trades about 0.27 of its potential returns per unit of risk. FUJITSU LTD ADR is currently generating about 0.02 per unit of risk. If you would invest  66,577  in Netflix on September 6, 2024 and sell it today you would earn a total of  24,529  from holding Netflix or generate 36.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Netflix  vs.  FUJITSU LTD ADR

Netflix

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 21 (%) 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.

FUJITSU LTD ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FUJITSU LTD ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, FUJITSU is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Netflix and FUJITSU

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

The idea behind Netflix and FUJITSU LTD ADR 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.

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.