Correlation Between Energisa and Netflix

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

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

Diversification Opportunities for Energisa and Netflix

0.62

Correlation Coefficient

Energisa  Netflix

Poor diversification

The 3 months correlation between Energisa and Netflix is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Energisa 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 Energisa SA 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 Energisa i.e., Energisa and Netflix go up and down completely randomly.

Pair Corralation between Energisa and Netflix

Assuming the 90 days trading horizon Energisa is expected to generate 1.62 times less return on investment than Netflix. In addition to that, Energisa is 1.1 times more volatile than Netflix. It trades about 0.03 of its total potential returns per unit of risk. Netflix is currently generating about 0.06 per unit of volatility. If you would invest  10,876  in Netflix on December 1, 2024 and sell it today you would earn a total of  615.00  from holding Netflix or generate 5.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.08%
Values	Daily Returns

Energisa SA  vs.  Netflix

Energisa SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energisa SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Energisa is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Netflix

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Netflix may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Energisa and Netflix

The main advantage of trading using opposite Energisa and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa 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 Energisa SA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.