Correlation Between Netflix and Lyxor Index

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

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

Diversification Opportunities for Netflix and Lyxor Index

0.31

Correlation Coefficient

Netflix  Lyxor Index

Weak diversification

The 3 months correlation between Netflix and Lyxor is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Lyxor Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Index Fund 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 Lyxor Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Index Fund has no effect on the direction of Netflix i.e., Netflix and Lyxor Index go up and down completely randomly.

Pair Corralation between Netflix and Lyxor Index

Given the investment horizon of 90 days Netflix is expected to generate 2.57 times more return on investment than Lyxor Index. However, Netflix is 2.57 times more volatile than Lyxor Index Fund. It trades about 0.23 of its potential returns per unit of risk. Lyxor Index Fund is currently generating about 0.08 per unit of risk. If you would invest  67,532  in Netflix on September 3, 2024 and sell it today you would earn a total of  21,149  from holding Netflix or generate 31.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Netflix  vs.  Lyxor Index Fund

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.

Lyxor Index Fund

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Index Fund are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lyxor Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Netflix and Lyxor Index

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

The idea behind Netflix and Lyxor Index Fund 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.