Correlation Between Netflix and Sierra Tactical

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

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

Diversification Opportunities for Netflix and Sierra Tactical

0.81

Correlation Coefficient

Netflix  Sierra Tactical

Very poor diversification

The 3 months correlation between Netflix and Sierra is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Sierra Tactical Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Tactical Risk 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 Sierra Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Tactical Risk has no effect on the direction of Netflix i.e., Netflix and Sierra Tactical go up and down completely randomly.

Pair Corralation between Netflix and Sierra Tactical

Given the investment horizon of 90 days Netflix is expected to generate 4.45 times more return on investment than Sierra Tactical. However, Netflix is 4.45 times more volatile than Sierra Tactical Risk. It trades about 0.24 of its potential returns per unit of risk. Sierra Tactical Risk is currently generating about 0.15 per unit of risk. If you would invest  68,680  in Netflix on September 12, 2024 and sell it today you would earn a total of  22,655  from holding Netflix or generate 32.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Netflix  vs.  Sierra Tactical Risk

Netflix

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 18 (%) 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.

Sierra Tactical Risk

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sierra Tactical Risk are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Sierra Tactical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Netflix and Sierra Tactical

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

The idea behind Netflix and Sierra Tactical Risk 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.