Correlation Between Netflix and Wal Mart

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

By analyzing existing cross correlation between Netflix and Wal Mart de Mxico, you can compare the effects of market volatilities on Netflix and Wal Mart 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 Wal Mart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Wal Mart.

Diversification Opportunities for Netflix and Wal Mart

0.12

Correlation Coefficient

Netflix  Wal Mart

Average diversification

The 3 months correlation between Netflix and Wal is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Wal Mart de Mxico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wal Mart de 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 Wal Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wal Mart de has no effect on the direction of Netflix i.e., Netflix and Wal Mart go up and down completely randomly.

Pair Corralation between Netflix and Wal Mart

Assuming the 90 days trading horizon Netflix is expected to generate 0.86 times more return on investment than Wal Mart. However, Netflix is 1.16 times less risky than Wal Mart. It trades about 0.11 of its potential returns per unit of risk. Wal Mart de Mxico is currently generating about 0.05 per unit of risk. If you would invest  1,796,501  in Netflix on November 28, 2024 and sell it today you would earn a total of  204,626  from holding Netflix or generate 11.39% return on investment over 90 days.

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

Netflix  vs.  Wal Mart de Mxico

Netflix

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Netflix may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Wal Mart de

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Netflix and Wal Mart

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

The idea behind Netflix and Wal Mart de Mxico 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.