Correlation Between Netflix and Marcus

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

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

Diversification Opportunities for Netflix and Marcus

0.91

Correlation Coefficient

Netflix  Marcus

Almost no diversification

The 3 months correlation between Netflix and Marcus is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Marcus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marcus 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 Marcus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marcus has no effect on the direction of Netflix i.e., Netflix and Marcus go up and down completely randomly.

Pair Corralation between Netflix and Marcus

Given the investment horizon of 90 days Netflix is expected to generate 1.74 times less return on investment than Marcus. But when comparing it to its historical volatility, Netflix is 1.14 times less risky than Marcus. It trades about 0.23 of its potential returns per unit of risk. Marcus is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  1,405  in Marcus on September 2, 2024 and sell it today you would earn a total of  859.00  from holding Marcus or generate 61.14% 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.  Marcus

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.

Marcus

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Marcus are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Marcus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and Marcus

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

The idea behind Netflix and Marcus 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.