Correlation Between Grupo Hotelero and Netflix

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

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

Diversification Opportunities for Grupo Hotelero and Netflix

0.3

Correlation Coefficient

Grupo Hotelero  Netflix

Weak diversification

The 3 months correlation between Grupo and Netflix is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Hotelero Santa and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Grupo Hotelero 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 Grupo Hotelero Santa 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 Grupo Hotelero i.e., Grupo Hotelero and Netflix go up and down completely randomly.

Pair Corralation between Grupo Hotelero and Netflix

Assuming the 90 days trading horizon Grupo Hotelero is expected to generate 13.89 times less return on investment than Netflix. In addition to that, Grupo Hotelero is 1.03 times more volatile than Netflix. It trades about 0.02 of its total potential returns per unit of risk. Netflix is currently generating about 0.23 per unit of volatility. If you would invest  1,565,746  in Netflix on October 7, 2024 and sell it today you would earn a total of  270,761  from holding Netflix or generate 17.29% return on investment over 90 days.

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

Grupo Hotelero Santa  vs.  Netflix

Grupo Hotelero Santa

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Hotelero Santa are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Grupo Hotelero is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Netflix

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Hotelero and Netflix

The main advantage of trading using opposite Grupo Hotelero and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Hotelero 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 Grupo Hotelero Santa 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 Global Correlations module to find global opportunities by holding instruments from different markets.