Correlation Between Netflix and Covalon Technologies

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

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

Diversification Opportunities for Netflix and Covalon Technologies

-0.14

Correlation Coefficient

Netflix  Covalon Technologies

Good diversification

The 3 months correlation between Netflix and Covalon is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Covalon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covalon Technologies 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 Covalon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covalon Technologies has no effect on the direction of Netflix i.e., Netflix and Covalon Technologies go up and down completely randomly.

Pair Corralation between Netflix and Covalon Technologies

Given the investment horizon of 90 days Netflix is expected to generate 0.67 times more return on investment than Covalon Technologies. However, Netflix is 1.5 times less risky than Covalon Technologies. It trades about 0.04 of its potential returns per unit of risk. Covalon Technologies is currently generating about -0.13 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	Insignificant
Accuracy	96.83%
Values	Daily Returns

Netflix  vs.  Covalon Technologies

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.

Covalon Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Covalon Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Netflix and Covalon Technologies

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

The idea behind Netflix and Covalon Technologies 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.