Correlation Between Netflix and Aeris Environmental

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

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

Diversification Opportunities for Netflix and Aeris Environmental

-0.38

Correlation Coefficient

Netflix  Aeris Environmental

Very good diversification

The 3 months correlation between Netflix and Aeris is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Aeris Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeris Environmental 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 Aeris Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeris Environmental has no effect on the direction of Netflix i.e., Netflix and Aeris Environmental go up and down completely randomly.

Pair Corralation between Netflix and Aeris Environmental

Given the investment horizon of 90 days Netflix is expected to generate 0.6 times more return on investment than Aeris Environmental. However, Netflix is 1.67 times less risky than Aeris Environmental. It trades about 0.07 of its potential returns per unit of risk. Aeris Environmental is currently generating about -0.14 per unit of risk. If you would invest  90,043  in Netflix on December 29, 2024 and sell it today you would earn a total of  7,629  from holding Netflix or generate 8.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Netflix  vs.  Aeris Environmental

Netflix

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Netflix may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Aeris Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aeris Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Netflix and Aeris Environmental

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

The idea behind Netflix and Aeris Environmental 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.