Correlation Between Netflix and IO Biotech

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

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

Diversification Opportunities for Netflix and IO Biotech

0.54

Correlation Coefficient

Netflix  IO Biotech

Very weak diversification

The 3 months correlation between Netflix and IOBT is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and IO Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IO Biotech 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 IO Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IO Biotech has no effect on the direction of Netflix i.e., Netflix and IO Biotech go up and down completely randomly.

Pair Corralation between Netflix and IO Biotech

Given the investment horizon of 90 days Netflix is expected to generate 0.59 times more return on investment than IO Biotech. However, Netflix is 1.69 times less risky than IO Biotech. It trades about 0.11 of its potential returns per unit of risk. IO Biotech is currently generating about 0.02 per unit of risk. If you would invest  90,043  in Netflix on November 30, 2024 and sell it today you would earn a total of  8,013  from holding Netflix or generate 8.9% return on investment over 90 days.

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

Netflix  vs.  IO Biotech

Netflix

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Netflix may actually be approaching a critical reversion point that can send shares even higher in March 2025.

IO Biotech

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IO Biotech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, IO Biotech may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Netflix and IO Biotech

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

The idea behind Netflix and IO Biotech 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.