Correlation Between AvalonBay Communities and Netflix
Can any of the company-specific risk be diversified away by investing in both AvalonBay Communities 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 AvalonBay Communities and Netflix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AvalonBay Communities and Netflix, you can compare the effects of market volatilities on AvalonBay Communities 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 AvalonBay Communities with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of AvalonBay Communities and Netflix.
Diversification Opportunities for AvalonBay Communities and Netflix
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AvalonBay and Netflix is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding AvalonBay Communities and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and AvalonBay Communities 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 AvalonBay Communities 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 AvalonBay Communities i.e., AvalonBay Communities and Netflix go up and down completely randomly.
Pair Corralation between AvalonBay Communities and Netflix
Assuming the 90 days trading horizon AvalonBay Communities is expected to generate 2.09 times less return on investment than Netflix. But when comparing it to its historical volatility, AvalonBay Communities is 1.0 times less risky than Netflix. It trades about 0.06 of its potential returns per unit of risk. Netflix is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,375 in Netflix on September 25, 2024 and sell it today you would earn a total of 7,855 from holding Netflix or generate 232.74% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 88.02% |
Values | Daily Returns |
AvalonBay Communities vs. Netflix
Performance |
Timeline |
AvalonBay Communities |
Netflix |
AvalonBay Communities and Netflix Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AvalonBay Communities and Netflix
The main advantage of trading using opposite AvalonBay Communities and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AvalonBay Communities 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.AvalonBay Communities vs. Equity Residential | AvalonBay Communities vs. Mid America Apartment Communities | AvalonBay Communities vs. Sun Communities | AvalonBay Communities vs. Essex Property Trust |
Netflix vs. AvalonBay Communities | Netflix vs. Accenture plc | Netflix vs. Fertilizantes Heringer SA | Netflix vs. salesforce inc |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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