Correlation Between Netflix and Lasertec

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

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

Diversification Opportunities for Netflix and Lasertec

0.32

Correlation Coefficient

Netflix  Lasertec

Weak diversification

The 3 months correlation between Netflix and Lasertec is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Lasertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lasertec 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 Lasertec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lasertec has no effect on the direction of Netflix i.e., Netflix and Lasertec go up and down completely randomly.

Pair Corralation between Netflix and Lasertec

Given the investment horizon of 90 days Netflix is expected to generate 1.68 times more return on investment than Lasertec. However, Netflix is 1.68 times more volatile than Lasertec. It trades about 0.05 of its potential returns per unit of risk. Lasertec is currently generating about -0.02 per unit of risk. If you would invest  91,145  in Netflix on December 23, 2024 and sell it today you would earn a total of  4,884  from holding Netflix or generate 5.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.85%
Values	Daily Returns

Netflix  vs.  Lasertec

Netflix

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 3 (%) 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 April 2025.

Lasertec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lasertec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Lasertec 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 Lasertec

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

The idea behind Netflix and Lasertec 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..