Correlation Between Netflix and Industrial Commercial

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

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

Diversification Opportunities for Netflix and Industrial Commercial

0.37

Correlation Coefficient

Netflix  Industrial Commercial

Weak diversification

The 3 months correlation between Netflix and Industrial is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Industrial Commercial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Commercial 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 Industrial Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Commercial has no effect on the direction of Netflix i.e., Netflix and Industrial Commercial go up and down completely randomly.

Pair Corralation between Netflix and Industrial Commercial

Given the investment horizon of 90 days Netflix is expected to generate 0.84 times more return on investment than Industrial Commercial. However, Netflix is 1.19 times less risky than Industrial Commercial. It trades about 0.23 of its potential returns per unit of risk. Industrial Commercial Bank is currently generating about 0.08 per unit of risk. If you would invest  67,968  in Netflix on September 4, 2024 and sell it today you would earn a total of  21,806  from holding Netflix or generate 32.08% return on investment over 90 days.

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

Netflix  vs.  Industrial Commercial Bank

Netflix

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 18 (%) 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.

Industrial Commercial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Commercial Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Industrial Commercial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Netflix and Industrial Commercial

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

The idea behind Netflix and Industrial Commercial Bank 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..