Correlation Between Netflix and Century Small
Can any of the company-specific risk be diversified away by investing in both Netflix and Century Small 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 Century Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Century Small Cap, you can compare the effects of market volatilities on Netflix and Century Small 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 Century Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Century Small.
Diversification Opportunities for Netflix and Century Small
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Netflix and Century is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Century Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Small Cap 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 Century Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Small Cap has no effect on the direction of Netflix i.e., Netflix and Century Small go up and down completely randomly.
Pair Corralation between Netflix and Century Small
Given the investment horizon of 90 days Netflix is expected to generate 1.3 times more return on investment than Century Small. However, Netflix is 1.3 times more volatile than Century Small Cap. It trades about 0.17 of its potential returns per unit of risk. Century Small Cap is currently generating about 0.13 per unit of risk. If you would invest 64,450 in Netflix on September 6, 2024 and sell it today you would earn a total of 26,656 from holding Netflix or generate 41.36% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Netflix vs. Century Small Cap
Performance |
Timeline |
Netflix |
Century Small Cap |
Netflix and Century Small Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Netflix and Century Small
The main advantage of trading using opposite Netflix and Century Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Century Small 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 Century Small will offset losses from the drop in Century Small's long position.Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
Century Small vs. Congress Mid Cap | Century Small vs. Congress Mid Cap | Century Small vs. Congress Large Cap | Century Small vs. Congress Large Cap |
Check out your portfolio center.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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