Correlation Between Netflix and Heritage Fund

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

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

Diversification Opportunities for Netflix and Heritage Fund

-0.1

Correlation Coefficient

Netflix  Heritage Fund

Good diversification

The 3 months correlation between Netflix and Heritage is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Heritage Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Fund A 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 Heritage Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Fund A has no effect on the direction of Netflix i.e., Netflix and Heritage Fund go up and down completely randomly.

Pair Corralation between Netflix and Heritage Fund

Given the investment horizon of 90 days Netflix is expected to generate 1.68 times more return on investment than Heritage Fund. However, Netflix is 1.68 times more volatile than Heritage Fund A. It trades about 0.13 of its potential returns per unit of risk. Heritage Fund A is currently generating about -0.01 per unit of risk. If you would invest  88,673  in Netflix on December 2, 2024 and sell it today you would earn a total of  9,383  from holding Netflix or generate 10.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Netflix  vs.  Heritage Fund A

Netflix

Risk-Adjusted Performance

Modest

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.

Heritage Fund A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heritage Fund A has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Netflix and Heritage Fund

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

The idea behind Netflix and Heritage Fund A 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.