Correlation Between Netflix and Longleaf Partners

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

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

Diversification Opportunities for Netflix and Longleaf Partners

-0.37

Correlation Coefficient

Netflix  Longleaf Partners

Very good diversification

The 3 months correlation between Netflix and Longleaf is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Longleaf Partners Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners 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 Longleaf Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longleaf Partners has no effect on the direction of Netflix i.e., Netflix and Longleaf Partners go up and down completely randomly.

Pair Corralation between Netflix and Longleaf Partners

Given the investment horizon of 90 days Netflix is expected to generate 1.87 times more return on investment than Longleaf Partners. However, Netflix is 1.87 times more volatile than Longleaf Partners International. It trades about 0.23 of its potential returns per unit of risk. Longleaf Partners International is currently generating about 0.02 per unit of risk. If you would invest  67,968  in Netflix on September 4, 2024 and sell it today you would earn a total of  21,806  from holding Netflix or generate 32.08% return on investment over 90 days.

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

Netflix  vs.  Longleaf Partners Internationa

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.

Longleaf Partners

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Longleaf Partners International are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Longleaf Partners 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 Longleaf Partners

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

The idea behind Netflix and Longleaf Partners International 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.