Correlation Between Netflix and Liberty Media

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

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

Diversification Opportunities for Netflix and Liberty Media

0.92

Correlation Coefficient

Netflix  Liberty Media

Almost no diversification

The 3 months correlation between Netflix and Liberty is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media 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 Liberty Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media has no effect on the direction of Netflix i.e., Netflix and Liberty Media go up and down completely randomly.

Pair Corralation between Netflix and Liberty Media

Given the investment horizon of 90 days Netflix is expected to generate 1.14 times more return on investment than Liberty Media. However, Netflix is 1.14 times more volatile than Liberty Media. It trades about 0.22 of its potential returns per unit of risk. Liberty Media is currently generating about 0.19 per unit of risk. If you would invest  70,691  in Netflix on September 17, 2024 and sell it today you would earn a total of  21,196  from holding Netflix or generate 29.98% return on investment over 90 days.

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

Netflix  vs.  Liberty Media

Netflix

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Liberty Media

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Liberty Media disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and Liberty Media

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

The idea behind Netflix and Liberty Media 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.