Correlation Between Netflix and Boston Beer

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

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

Diversification Opportunities for Netflix and Boston Beer

-0.44

Correlation Coefficient

Netflix  Boston Beer

Very good diversification

The 3 months correlation between Netflix and Boston is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and The Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer 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 Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Netflix i.e., Netflix and Boston Beer go up and down completely randomly.

Pair Corralation between Netflix and Boston Beer

Given the investment horizon of 90 days Netflix is expected to generate 1.28 times more return on investment than Boston Beer. However, Netflix is 1.28 times more volatile than The Boston Beer. It trades about 0.04 of its potential returns per unit of risk. The Boston Beer is currently generating about -0.2 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  3,342  from holding Netflix or generate 3.71% return on investment over 90 days.

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

Netflix  vs.  The Boston Beer

Netflix

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Netflix is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Boston Beer

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Netflix and Boston Beer

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

The idea behind Netflix and The Boston Beer 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.