Correlation Between Netflix and Medicure

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

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

Diversification Opportunities for Netflix and Medicure

-0.55

Correlation Coefficient

Netflix  Medicure

Excellent diversification

The 3 months correlation between Netflix and Medicure is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Medicure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicure 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 Medicure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicure has no effect on the direction of Netflix i.e., Netflix and Medicure go up and down completely randomly.

Pair Corralation between Netflix and Medicure

Given the investment horizon of 90 days Netflix is expected to generate 0.53 times more return on investment than Medicure. However, Netflix is 1.87 times less risky than Medicure. It trades about 0.08 of its potential returns per unit of risk. Medicure is currently generating about -0.17 per unit of risk. If you would invest  88,681  in Netflix on November 29, 2024 and sell it today you would earn a total of  7,626  from holding Netflix or generate 8.6% return on investment over 90 days.

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

Netflix  vs.  Medicure

Netflix

Risk-Adjusted Performance

OK

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.

Medicure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medicure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in March 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Netflix and Medicure

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

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