Correlation Between Netflix and Clear Channel

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

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

Diversification Opportunities for Netflix and Clear Channel

-0.25

Correlation Coefficient

Netflix  Clear Channel

Very good diversification

The 3 months correlation between Netflix and Clear is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Clear Channel Outdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clear Channel Outdoor 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 Clear Channel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clear Channel Outdoor has no effect on the direction of Netflix i.e., Netflix and Clear Channel go up and down completely randomly.

Pair Corralation between Netflix and Clear Channel

Given the investment horizon of 90 days Netflix is expected to under-perform the Clear Channel. But the stock apears to be less risky and, when comparing its historical volatility, Netflix is 1.79 times less risky than Clear Channel. The stock trades about -0.21 of its potential returns per unit of risk. The Clear Channel Outdoor is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  138.00  in Clear Channel Outdoor on October 23, 2024 and sell it today you would earn a total of  11.00  from holding Clear Channel Outdoor or generate 7.97% return on investment over 90 days.

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

Netflix  vs.  Clear Channel Outdoor

Netflix

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 12 (%) 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.

Clear Channel Outdoor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clear Channel Outdoor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Clear Channel is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Netflix and Clear Channel

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

The idea behind Netflix and Clear Channel Outdoor 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.