Correlation Between Netflix and Arena Hospitality

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

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

Diversification Opportunities for Netflix and Arena Hospitality

0.36

Correlation Coefficient

Netflix  Arena Hospitality

Weak diversification

The 3 months correlation between Netflix and Arena is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Arena Hospitality Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Hospitality 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 Arena Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Hospitality has no effect on the direction of Netflix i.e., Netflix and Arena Hospitality go up and down completely randomly.

Pair Corralation between Netflix and Arena Hospitality

Given the investment horizon of 90 days Netflix is expected to generate 1.82 times more return on investment than Arena Hospitality. However, Netflix is 1.82 times more volatile than Arena Hospitality Group. It trades about 0.08 of its potential returns per unit of risk. Arena Hospitality Group is currently generating about 0.13 per unit of risk. If you would invest  90,755  in Netflix on December 27, 2024 and sell it today you would earn a total of  8,973  from holding Netflix or generate 9.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	81.67%
Values	Daily Returns

Netflix  vs.  Arena Hospitality Group

Netflix

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 6 (%) 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.

Arena Hospitality

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arena Hospitality Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Arena Hospitality may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Netflix and Arena Hospitality

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

The idea behind Netflix and Arena Hospitality Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.