Correlation Between Netflix and SPORT LISBOA

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

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

Diversification Opportunities for Netflix and SPORT LISBOA

-0.09

Correlation Coefficient

Netflix  SPORT LISBOA

Good diversification

The 3 months correlation between Netflix and SPORT is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and SPORT LISBOA E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORT LISBOA E and Netflix 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 Netflix are associated (or correlated) with SPORT LISBOA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORT LISBOA E has no effect on the direction of Netflix i.e., Netflix and SPORT LISBOA go up and down completely randomly.

Pair Corralation between Netflix and SPORT LISBOA

Assuming the 90 days horizon Netflix is expected to generate 0.69 times more return on investment than SPORT LISBOA. However, Netflix is 1.46 times less risky than SPORT LISBOA. It trades about 0.04 of its potential returns per unit of risk. SPORT LISBOA E is currently generating about 0.02 per unit of risk. If you would invest  86,470  in Netflix on December 29, 2024 and sell it today you would earn a total of  3,930  from holding Netflix or generate 4.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Netflix  vs.  SPORT LISBOA E

Netflix

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Netflix may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SPORT LISBOA E

Risk-Adjusted Performance

Weak

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

Pair Trading with Netflix and SPORT LISBOA

The main advantage of trading using opposite Netflix and SPORT LISBOA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, SPORT LISBOA 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 SPORT LISBOA will offset losses from the drop in SPORT LISBOA's long position.

The idea behind Netflix and SPORT LISBOA E 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.