Correlation Between National Beverage and Netflix

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

By analyzing existing cross correlation between National Beverage Corp and Netflix, you can compare the effects of market volatilities on National Beverage and Netflix 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 National Beverage with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Netflix.

Diversification Opportunities for National Beverage and Netflix

0.64

Correlation Coefficient

National Beverage  Netflix

Poor diversification

The 3 months correlation between National and Netflix is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and National Beverage 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 National Beverage Corp are associated (or correlated) with Netflix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netflix has no effect on the direction of National Beverage i.e., National Beverage and Netflix go up and down completely randomly.

Pair Corralation between National Beverage and Netflix

Assuming the 90 days horizon National Beverage is expected to generate 10.96 times less return on investment than Netflix. But when comparing it to its historical volatility, National Beverage Corp is 1.15 times less risky than Netflix. It trades about 0.02 of its potential returns per unit of risk. Netflix is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  66,480  in Netflix on October 9, 2024 and sell it today you would earn a total of  18,460  from holding Netflix or generate 27.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

National Beverage Corp  vs.  Netflix

National Beverage Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, National Beverage is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Netflix

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Netflix reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Beverage and Netflix

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

The idea behind National Beverage Corp and Netflix 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.