Correlation Between Netflix and Hollywood Intermediate

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

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

Diversification Opportunities for Netflix and Hollywood Intermediate

0.0

Correlation Coefficient

Netflix  Hollywood Intermediate

Pay attention - limited upside

The 3 months correlation between Netflix and Hollywood is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Hollywood Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hollywood Intermediate 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 Hollywood Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hollywood Intermediate has no effect on the direction of Netflix i.e., Netflix and Hollywood Intermediate go up and down completely randomly.

Pair Corralation between Netflix and Hollywood Intermediate

Given the investment horizon of 90 days Netflix is expected to generate 0.47 times more return on investment than Hollywood Intermediate. However, Netflix is 2.12 times less risky than Hollywood Intermediate. It trades about 0.11 of its potential returns per unit of risk. Hollywood Intermediate is currently generating about -0.04 per unit of risk. If you would invest  31,578  in Netflix on October 10, 2024 and sell it today you would earn a total of  56,341  from holding Netflix or generate 178.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Netflix  vs.  Hollywood Intermediate

Netflix

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 12 (%) 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.

Hollywood Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hollywood Intermediate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Hollywood Intermediate is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Netflix and Hollywood Intermediate

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

The idea behind Netflix and Hollywood Intermediate 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.