Correlation Between Netflix and Digihost Technology

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

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

Diversification Opportunities for Netflix and Digihost Technology

0.63

Correlation Coefficient

Netflix  Digihost Technology

Poor diversification

The 3 months correlation between Netflix and Digihost is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Digihost Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digihost Technology 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 Digihost Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digihost Technology has no effect on the direction of Netflix i.e., Netflix and Digihost Technology go up and down completely randomly.

Pair Corralation between Netflix and Digihost Technology

Given the investment horizon of 90 days Netflix is expected to generate 0.21 times more return on investment than Digihost Technology. However, Netflix is 4.74 times less risky than Digihost Technology. It trades about 0.08 of its potential returns per unit of risk. Digihost Technology is currently generating about -0.03 per unit of risk. If you would invest  89,774  in Netflix on December 2, 2024 and sell it today you would earn a total of  8,282  from holding Netflix or generate 9.23% return on investment over 90 days.

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

Netflix  vs.  Digihost Technology

Netflix

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 6 (%) 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.

Digihost Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digihost Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Netflix and Digihost Technology

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

The idea behind Netflix and Digihost Technology 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.