Correlation Between Netflix and Citic Guoan

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

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

Diversification Opportunities for Netflix and Citic Guoan

0.81

Correlation Coefficient

Netflix  Citic Guoan

Very poor diversification

The 3 months correlation between Netflix and Citic is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Citic Guoan Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Guoan Wine 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 Citic Guoan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Guoan Wine has no effect on the direction of Netflix i.e., Netflix and Citic Guoan go up and down completely randomly.

Pair Corralation between Netflix and Citic Guoan

Given the investment horizon of 90 days Netflix is expected to generate 1.08 times less return on investment than Citic Guoan. But when comparing it to its historical volatility, Netflix is 1.57 times less risky than Citic Guoan. It trades about 0.23 of its potential returns per unit of risk. Citic Guoan Wine is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  476.00  in Citic Guoan Wine on September 5, 2024 and sell it today you would earn a total of  142.00  from holding Citic Guoan Wine or generate 29.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	92.06%
Values	Daily Returns

Netflix  vs.  Citic Guoan Wine

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.

Citic Guoan Wine

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Citic Guoan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and Citic Guoan

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

The idea behind Netflix and Citic Guoan Wine 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.