Correlation Between Netflix and Midcap Growth

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

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

Diversification Opportunities for Netflix and Midcap Growth

0.92

Correlation Coefficient

Netflix  Midcap Growth

Almost no diversification

The 3 months correlation between Netflix and Midcap is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Midcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth 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 Midcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Growth has no effect on the direction of Netflix i.e., Netflix and Midcap Growth go up and down completely randomly.

Pair Corralation between Netflix and Midcap Growth

Given the investment horizon of 90 days Netflix is expected to generate 1.18 times more return on investment than Midcap Growth. However, Netflix is 1.18 times more volatile than Midcap Growth Fund. It trades about 0.59 of its potential returns per unit of risk. Midcap Growth Fund is currently generating about 0.68 per unit of risk. If you would invest  75,551  in Netflix on September 4, 2024 and sell it today you would earn a total of  14,666  from holding Netflix or generate 19.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	80.95%
Values	Daily Returns

Netflix  vs.  Midcap Growth Fund

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.

Midcap Growth

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Midcap Growth Fund are ranked lower than 31 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Midcap Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and Midcap Growth

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

The idea behind Netflix and Midcap Growth Fund 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.

Check out your portfolio center.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.