Correlation Between Ford and Netflix

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

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

Diversification Opportunities for Ford and Netflix

0.58

Correlation Coefficient

Ford  Netflix

Very weak diversification

The 3 months correlation between Ford and Netflix is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Ford 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 Ford Motor 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 Ford i.e., Ford and Netflix go up and down completely randomly.

Pair Corralation between Ford and Netflix

Taking into account the 90-day investment horizon Ford is expected to generate 10.99 times less return on investment than Netflix. In addition to that, Ford is 1.05 times more volatile than Netflix. It trades about 0.02 of its total potential returns per unit of risk. Netflix is currently generating about 0.28 per unit of volatility. If you would invest  61,480  in Netflix on September 5, 2024 and sell it today you would earn a total of  24,020  from holding Netflix or generate 39.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Ford Motor  vs.  Netflix

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

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

Netflix

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Netflix reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Netflix

The main advantage of trading using opposite Ford and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.