Correlation Between Netflix and Steward Covered

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

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

Diversification Opportunities for Netflix and Steward Covered

0.76

Correlation Coefficient

Netflix  Steward Covered

Poor diversification

The 3 months correlation between Netflix and Steward is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Steward Ered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Ered Call 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 Steward Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Ered Call has no effect on the direction of Netflix i.e., Netflix and Steward Covered go up and down completely randomly.

Pair Corralation between Netflix and Steward Covered

Given the investment horizon of 90 days Netflix is expected to generate 4.38 times more return on investment than Steward Covered. However, Netflix is 4.38 times more volatile than Steward Ered Call. It trades about 0.27 of its potential returns per unit of risk. Steward Ered Call is currently generating about 0.25 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	100.0%
Values	Daily Returns

Netflix  vs.  Steward Ered Call

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.

Steward Ered Call

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Steward Ered Call are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Steward Covered may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Netflix and Steward Covered

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

The idea behind Netflix and Steward Ered Call 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.