Correlation Between Netflix and Radico Khaitan

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

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

Diversification Opportunities for Netflix and Radico Khaitan

0.78

Correlation Coefficient

Netflix  Radico Khaitan

Poor diversification

The 3 months correlation between Netflix and Radico is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Radico Khaitan Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radico Khaitan 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 Radico Khaitan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radico Khaitan has no effect on the direction of Netflix i.e., Netflix and Radico Khaitan go up and down completely randomly.

Pair Corralation between Netflix and Radico Khaitan

Given the investment horizon of 90 days Netflix is expected to generate 0.85 times more return on investment than Radico Khaitan. However, Netflix is 1.18 times less risky than Radico Khaitan. It trades about 0.27 of its potential returns per unit of risk. Radico Khaitan Limited is currently generating about 0.13 per unit of risk. If you would invest  66,577  in Netflix on September 6, 2024 and sell it today you would earn a total of  24,529  from holding Netflix or generate 36.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Netflix  vs.  Radico Khaitan Limited

Netflix

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 21 (%) 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.

Radico Khaitan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radico Khaitan Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Radico Khaitan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and Radico Khaitan

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

The idea behind Netflix and Radico Khaitan Limited 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.