Correlation Between Netflix and State Gas

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

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

Diversification Opportunities for Netflix and State Gas

-0.15

Correlation Coefficient

Netflix  State Gas

Good diversification

The 3 months correlation between Netflix and State is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and State Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Gas 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 State Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Gas has no effect on the direction of Netflix i.e., Netflix and State Gas go up and down completely randomly.

Pair Corralation between Netflix and State Gas

Given the investment horizon of 90 days Netflix is expected to generate 0.31 times more return on investment than State Gas. However, Netflix is 3.25 times less risky than State Gas. It trades about 0.26 of its potential returns per unit of risk. State Gas is currently generating about 0.04 per unit of risk. If you would invest  68,680  in Netflix on September 12, 2024 and sell it today you would earn a total of  24,976  from holding Netflix or generate 36.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Netflix  vs.  State Gas

Netflix

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 20 (%) 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.

State Gas

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in State Gas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, State Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and State Gas

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

The idea behind Netflix and State Gas 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.