Correlation Between Airports and Netflix

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

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

Diversification Opportunities for Airports and Netflix

-0.55

Correlation Coefficient

Airports  Netflix

Excellent diversification

The 3 months correlation between Airports and Netflix is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Airports of Thailand and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Airports 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 Airports of Thailand 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 Airports i.e., Airports and Netflix go up and down completely randomly.

Pair Corralation between Airports and Netflix

Assuming the 90 days horizon Airports of Thailand is expected to under-perform the Netflix. In addition to that, Airports is 2.82 times more volatile than Netflix. It trades about -0.06 of its total potential returns per unit of risk. Netflix is currently generating about 0.11 per unit of volatility. If you would invest  88,681  in Netflix on November 29, 2024 and sell it today you would earn a total of  10,325  from holding Netflix or generate 11.64% return on investment over 90 days.

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

Airports of Thailand  vs.  Netflix

Airports of Thailand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Airports of Thailand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Netflix

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 8 (%) 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.

Pair Trading with Airports and Netflix

The main advantage of trading using opposite Airports and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airports 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 Airports of Thailand 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.