Correlation Between Netflix and Green Star

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

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

Diversification Opportunities for Netflix and Green Star

0.09

Correlation Coefficient

Netflix  Green Star

Significant diversification

The 3 months correlation between Netflix and Green is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Green Star Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Star Products 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 Green Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Star Products has no effect on the direction of Netflix i.e., Netflix and Green Star go up and down completely randomly.

Pair Corralation between Netflix and Green Star

Given the investment horizon of 90 days Netflix is expected to generate 27.33 times less return on investment than Green Star. But when comparing it to its historical volatility, Netflix is 8.27 times less risky than Green Star. It trades about 0.04 of its potential returns per unit of risk. Green Star Products is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.08  in Green Star Products on December 28, 2024 and sell it today you would earn a total of  0.02  from holding Green Star Products or generate 25.0% return on investment over 90 days.

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

Netflix  vs.  Green Star Products

Netflix

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Netflix is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Green Star Products

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Green Star Products are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Green Star demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and Green Star

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

The idea behind Netflix and Green Star Products 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.