Correlation Between Netflix and Grand Pacific

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

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

Diversification Opportunities for Netflix and Grand Pacific

-0.19

Correlation Coefficient

Netflix  Grand Pacific

Good diversification

The 3 months correlation between Netflix and Grand is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Grand Pacific Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Pacific Petroc 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 Grand Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Pacific Petroc has no effect on the direction of Netflix i.e., Netflix and Grand Pacific go up and down completely randomly.

Pair Corralation between Netflix and Grand Pacific

Given the investment horizon of 90 days Netflix is expected to generate 2.08 times more return on investment than Grand Pacific. However, Netflix is 2.08 times more volatile than Grand Pacific Petrochemical. It trades about 0.23 of its potential returns per unit of risk. Grand Pacific Petrochemical is currently generating about 0.02 per unit of risk. If you would invest  68,362  in Netflix on September 5, 2024 and sell it today you would earn a total of  21,855  from holding Netflix or generate 31.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Netflix  vs.  Grand Pacific Petrochemical

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 essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Grand Pacific Petroc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Pacific Petrochemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Grand Pacific is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Netflix and Grand Pacific

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

The idea behind Netflix and Grand Pacific Petrochemical 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.