Correlation Between Netflix and Columbia Emerging

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

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

Diversification Opportunities for Netflix and Columbia Emerging

-0.29

Correlation Coefficient

Netflix  Columbia Emerging

Very good diversification

The 3 months correlation between Netflix and Columbia is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Columbia Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Emerging Markets 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 Columbia Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Emerging Markets has no effect on the direction of Netflix i.e., Netflix and Columbia Emerging go up and down completely randomly.

Pair Corralation between Netflix and Columbia Emerging

Given the investment horizon of 90 days Netflix is expected to generate 6.81 times more return on investment than Columbia Emerging. However, Netflix is 6.81 times more volatile than Columbia Emerging Markets. It trades about 0.25 of its potential returns per unit of risk. Columbia Emerging Markets is currently generating about 0.06 per unit of risk. If you would invest  68,147  in Netflix on September 11, 2024 and sell it today you would earn a total of  23,188  from holding Netflix or generate 34.03% return on investment over 90 days.

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

Netflix  vs.  Columbia Emerging Markets

Netflix

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 19 (%) 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.

Columbia Emerging Markets

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Emerging Markets are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Netflix and Columbia Emerging

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

The idea behind Netflix and Columbia Emerging Markets 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.