Correlation Between Netflix and Arlington Asset

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

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

Diversification Opportunities for Netflix and Arlington Asset

0.8

Correlation Coefficient

Netflix  Arlington Asset

Very poor diversification

The 3 months correlation between Netflix and Arlington is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Arlington Asset Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arlington Asset Inve 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 Arlington Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arlington Asset Inve has no effect on the direction of Netflix i.e., Netflix and Arlington Asset go up and down completely randomly.

Pair Corralation between Netflix and Arlington Asset

If you would invest  76,391  in Netflix on September 6, 2024 and sell it today you would earn a total of  14,715  from holding Netflix or generate 19.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	4.55%
Values	Daily Returns

Netflix  vs.  Arlington Asset Investment

Netflix

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 21 (%) 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.

Arlington Asset Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arlington Asset Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Arlington Asset is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Netflix and Arlington Asset

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

The idea behind Netflix and Arlington Asset Investment 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 Managers module to screen money managers from public funds and ETFs managed around the world.