Correlation Between Netflix and Columbia Select

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

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

Diversification Opportunities for Netflix and Columbia Select

0.87

Correlation Coefficient

Netflix  Columbia Select

Very poor diversification

The 3 months correlation between Netflix and Columbia is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Columbia Select Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Select Large 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 Columbia Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Select Large has no effect on the direction of Netflix i.e., Netflix and Columbia Select go up and down completely randomly.

Pair Corralation between Netflix and Columbia Select

Given the investment horizon of 90 days Netflix is expected to generate 2.44 times more return on investment than Columbia Select. However, Netflix is 2.44 times more volatile than Columbia Select Large. It trades about 0.28 of its potential returns per unit of risk. Columbia Select Large is currently generating about 0.13 per unit of risk. If you would invest  67,362  in Netflix on September 10, 2024 and sell it today you would earn a total of  26,112  from holding Netflix or generate 38.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Netflix  vs.  Columbia Select Large

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.

Columbia Select Large

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Select Large are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Columbia Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Netflix and Columbia Select

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

The idea behind Netflix and Columbia Select Large 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.