Correlation Between Netflix and LifeQuest World

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

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

Diversification Opportunities for Netflix and LifeQuest World

-0.5

Correlation Coefficient

Netflix  LifeQuest World

Very good diversification

The 3 months correlation between Netflix and LifeQuest is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and LifeQuest World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LifeQuest World 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 LifeQuest World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LifeQuest World has no effect on the direction of Netflix i.e., Netflix and LifeQuest World go up and down completely randomly.

Pair Corralation between Netflix and LifeQuest World

Given the investment horizon of 90 days Netflix is expected to generate 8.27 times less return on investment than LifeQuest World. But when comparing it to its historical volatility, Netflix is 14.41 times less risky than LifeQuest World. It trades about 0.22 of its potential returns per unit of risk. LifeQuest World is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.10  in LifeQuest World on August 31, 2024 and sell it today you would lose (0.19) from holding LifeQuest World or give up 17.27% of portfolio value over 90 days.

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

Netflix  vs.  LifeQuest World

Netflix

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 17 (%) 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.

LifeQuest World

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LifeQuest World are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, LifeQuest World exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and LifeQuest World

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

The idea behind Netflix and LifeQuest World 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.