Correlation Between Netflix and Enterprise

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

By analyzing existing cross correlation between Netflix and Enterprise 40 Technology, you can compare the effects of market volatilities on Netflix and Enterprise 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 Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Enterprise.

Diversification Opportunities for Netflix and Enterprise

0.06

Correlation Coefficient

Netflix  Enterprise

Significant diversification

The 3 months correlation between Netflix and Enterprise is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Enterprise 40 Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise 40 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 Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise 40 Technology has no effect on the direction of Netflix i.e., Netflix and Enterprise go up and down completely randomly.

Pair Corralation between Netflix and Enterprise

If you would invest  67,968  in Netflix on September 4, 2024 and sell it today you would earn a total of  21,806  from holding Netflix or generate 32.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Netflix  vs.  Enterprise 40 Technology

Netflix

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Enterprise 40 Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enterprise 40 Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Enterprise is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Netflix and Enterprise

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

The idea behind Netflix and Enterprise 40 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.