Correlation Between Netflix and Aberdeen International

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

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

Diversification Opportunities for Netflix and Aberdeen International

0.35

Correlation Coefficient

Netflix  Aberdeen International

Weak diversification

The 3 months correlation between Netflix and Aberdeen is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Aberdeen International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen International 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 Aberdeen International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen International has no effect on the direction of Netflix i.e., Netflix and Aberdeen International go up and down completely randomly.

Pair Corralation between Netflix and Aberdeen International

Given the investment horizon of 90 days Netflix is expected to generate 0.16 times more return on investment than Aberdeen International. However, Netflix is 6.44 times less risky than Aberdeen International. It trades about 0.59 of its potential returns per unit of risk. Aberdeen International is currently generating about 0.04 per unit of risk. If you would invest  75,551  in Netflix on September 5, 2024 and sell it today you would earn a total of  14,666  from holding Netflix or generate 19.41% return on investment over 90 days.

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

Netflix  vs.  Aberdeen International

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.

Aberdeen International

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aberdeen International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and Aberdeen International

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

The idea behind Netflix and Aberdeen International 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.