Correlation Between Netflix and Putnam Dynamic

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

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

Diversification Opportunities for Netflix and Putnam Dynamic

0.82

Correlation Coefficient

Netflix  Putnam Dynamic

Very poor diversification

The 3 months correlation between Netflix and Putnam is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Putnam Dynamic Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Dynamic Asset 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 Putnam Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Dynamic Asset has no effect on the direction of Netflix i.e., Netflix and Putnam Dynamic go up and down completely randomly.

Pair Corralation between Netflix and Putnam Dynamic

Given the investment horizon of 90 days Netflix is expected to generate 4.71 times more return on investment than Putnam Dynamic. However, Netflix is 4.71 times more volatile than Putnam Dynamic Asset. It trades about 0.25 of its potential returns per unit of risk. Putnam Dynamic Asset is currently generating about 0.16 per unit of risk. If you would invest  69,706  in Netflix on September 13, 2024 and sell it today you would earn a total of  23,950  from holding Netflix or generate 34.36% return on investment over 90 days.

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

Netflix  vs.  Putnam Dynamic Asset

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.

Putnam Dynamic Asset

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Dynamic Asset are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Putnam Dynamic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Netflix and Putnam Dynamic

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

The idea behind Netflix and Putnam Dynamic Asset 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.