Correlation Between Netflix and SSAB AB

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

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

Diversification Opportunities for Netflix and SSAB AB

0.42

Correlation Coefficient

Netflix  SSAB AB

Very weak diversification

The 3 months correlation between Netflix and SSAB is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and SSAB AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSAB AB 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 SSAB AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSAB AB has no effect on the direction of Netflix i.e., Netflix and SSAB AB go up and down completely randomly.

Pair Corralation between Netflix and SSAB AB

Given the investment horizon of 90 days Netflix is expected to generate 1.11 times more return on investment than SSAB AB. However, Netflix is 1.11 times more volatile than SSAB AB. It trades about 0.23 of its potential returns per unit of risk. SSAB AB is currently generating about 0.07 per unit of risk. If you would invest  67,532  in Netflix on September 3, 2024 and sell it today you would earn a total of  21,149  from holding Netflix or generate 31.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Netflix  vs.  SSAB AB

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.

SSAB AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SSAB AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SSAB AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Netflix and SSAB AB

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

The idea behind Netflix and SSAB AB 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.