Correlation Between Netflix and Globalstar

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

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

Diversification Opportunities for Netflix and Globalstar

0.86

Correlation Coefficient

Netflix  Globalstar

Very poor diversification

The 3 months correlation between Netflix and Globalstar is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Globalstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalstar 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 Globalstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalstar has no effect on the direction of Netflix i.e., Netflix and Globalstar go up and down completely randomly.

Pair Corralation between Netflix and Globalstar

Given the investment horizon of 90 days Netflix is expected to generate 2.66 times less return on investment than Globalstar. But when comparing it to its historical volatility, Netflix is 3.43 times less risky than Globalstar. It trades about 0.24 of its potential returns per unit of risk. Globalstar is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  118.00  in Globalstar on September 12, 2024 and sell it today you would earn a total of  111.00  from holding Globalstar or generate 94.07% return on investment over 90 days.

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

Netflix  vs.  Globalstar

Netflix

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 19 (%) 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.

Globalstar

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globalstar are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Globalstar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and Globalstar

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

The idea behind Netflix and Globalstar 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 Stocks Directory module to find actively traded stocks across global markets.