Correlation Between HeadsUp Entertainment and Netflix

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

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

Diversification Opportunities for HeadsUp Entertainment and Netflix

0.24

Correlation Coefficient

HeadsUp Entertainment  Netflix

Modest diversification

The 3 months correlation between HeadsUp and Netflix is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding HeadsUp Entertainment Internat and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and HeadsUp Entertainment 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 HeadsUp Entertainment International 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 HeadsUp Entertainment i.e., HeadsUp Entertainment and Netflix go up and down completely randomly.

Pair Corralation between HeadsUp Entertainment and Netflix

Given the investment horizon of 90 days HeadsUp Entertainment is expected to generate 1.62 times less return on investment than Netflix. In addition to that, HeadsUp Entertainment is 4.09 times more volatile than Netflix. It trades about 0.03 of its total potential returns per unit of risk. Netflix is currently generating about 0.21 per unit of volatility. If you would invest  75,455  in Netflix on October 24, 2024 and sell it today you would earn a total of  19,944  from holding Netflix or generate 26.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

HeadsUp Entertainment Internat  vs.  Netflix

HeadsUp Entertainment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HeadsUp Entertainment International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, HeadsUp Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.

Netflix

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 16 (%) 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 HeadsUp Entertainment and Netflix

The main advantage of trading using opposite HeadsUp Entertainment and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HeadsUp Entertainment 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 HeadsUp Entertainment International 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.