Correlation Between Netflix and Land Securities

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

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

Diversification Opportunities for Netflix and Land Securities

0.49

Correlation Coefficient

Netflix  Land Securities

Very weak diversification

The 3 months correlation between Netflix and Land is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Land Securities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Land Securities Group 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 Land Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Land Securities Group has no effect on the direction of Netflix i.e., Netflix and Land Securities go up and down completely randomly.

Pair Corralation between Netflix and Land Securities

Given the investment horizon of 90 days Netflix is expected to generate 1.05 times more return on investment than Land Securities. However, Netflix is 1.05 times more volatile than Land Securities Group. It trades about 0.04 of its potential returns per unit of risk. Land Securities Group is currently generating about 0.02 per unit of risk. If you would invest  90,043  in Netflix on December 28, 2024 and sell it today you would earn a total of  3,342  from holding Netflix or generate 3.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.16%
Values	Daily Returns

Netflix  vs.  Land Securities Group

Netflix

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Netflix is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Land Securities Group

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Land Securities Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Land Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Netflix and Land Securities

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

The idea behind Netflix and Land Securities Group 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.