Correlation Between Netflix and United Tractors

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

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

Diversification Opportunities for Netflix and United Tractors

-0.2

Correlation Coefficient

Netflix  United Tractors

Good diversification

The 3 months correlation between Netflix and United is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and United Tractors Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Tractors Tbk 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 United Tractors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Tractors Tbk has no effect on the direction of Netflix i.e., Netflix and United Tractors go up and down completely randomly.

Pair Corralation between Netflix and United Tractors

Given the investment horizon of 90 days Netflix is expected to generate 1.0 times more return on investment than United Tractors. However, Netflix is 1.0 times more volatile than United Tractors Tbk. It trades about 0.3 of its potential returns per unit of risk. United Tractors Tbk is currently generating about 0.02 per unit of risk. If you would invest  70,192  in Netflix on September 5, 2024 and sell it today you would earn a total of  20,914  from holding Netflix or generate 29.8% return on investment over 90 days.

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

Netflix  vs.  United Tractors Tbk

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.

United Tractors Tbk

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days United Tractors Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, United Tractors 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 United Tractors

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

The idea behind Netflix and United Tractors Tbk 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.