Correlation Between Netflix and UNICREDIT SPA

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

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

Diversification Opportunities for Netflix and UNICREDIT SPA

0.35

Correlation Coefficient

Netflix  UNICREDIT SPA

Weak diversification

The 3 months correlation between Netflix and UNICREDIT is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and UNICREDIT SPA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNICREDIT SPA ADR 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 UNICREDIT SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNICREDIT SPA ADR has no effect on the direction of Netflix i.e., Netflix and UNICREDIT SPA go up and down completely randomly.

Pair Corralation between Netflix and UNICREDIT SPA

Given the investment horizon of 90 days Netflix is expected to generate 5.56 times less return on investment than UNICREDIT SPA. In addition to that, Netflix is 1.32 times more volatile than UNICREDIT SPA ADR. It trades about 0.04 of its total potential returns per unit of risk. UNICREDIT SPA ADR is currently generating about 0.26 per unit of volatility. If you would invest  1,960  in UNICREDIT SPA ADR on December 30, 2024 and sell it today you would earn a total of  700.00  from holding UNICREDIT SPA ADR or generate 35.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Netflix  vs.  UNICREDIT SPA ADR

Netflix

Risk-Adjusted Performance

Weak

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.

UNICREDIT SPA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UNICREDIT SPA ADR are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, UNICREDIT SPA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and UNICREDIT SPA

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

The idea behind Netflix and UNICREDIT SPA ADR 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.