Correlation Between Netflix and Carl Zeiss

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

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

Diversification Opportunities for Netflix and Carl Zeiss

0.45

Correlation Coefficient

Netflix  Carl Zeiss

Very weak diversification

The 3 months correlation between Netflix and Carl is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Carl Zeiss Meditec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carl Zeiss Meditec 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 Carl Zeiss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carl Zeiss Meditec has no effect on the direction of Netflix i.e., Netflix and Carl Zeiss go up and down completely randomly.

Pair Corralation between Netflix and Carl Zeiss

Given the investment horizon of 90 days Netflix is expected to generate 4.69 times less return on investment than Carl Zeiss. But when comparing it to its historical volatility, Netflix is 1.5 times less risky than Carl Zeiss. It trades about 0.06 of its potential returns per unit of risk. Carl Zeiss Meditec is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,920  in Carl Zeiss Meditec on December 25, 2024 and sell it today you would earn a total of  2,363  from holding Carl Zeiss Meditec or generate 48.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Netflix  vs.  Carl Zeiss Meditec

Netflix

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Netflix may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Carl Zeiss Meditec

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carl Zeiss Meditec are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Carl Zeiss showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and Carl Zeiss

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

The idea behind Netflix and Carl Zeiss Meditec 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.