Correlation Between Netflix and Sitio Royalties

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

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

Diversification Opportunities for Netflix and Sitio Royalties

-0.42

Correlation Coefficient

Netflix  Sitio Royalties

Very good diversification

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

Pair Corralation between Netflix and Sitio Royalties

Given the investment horizon of 90 days Netflix is expected to generate 1.11 times more return on investment than Sitio Royalties. However, Netflix is 1.11 times more volatile than Sitio Royalties Corp. It trades about 0.08 of its potential returns per unit of risk. Sitio Royalties Corp is currently generating about -0.19 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.  Sitio Royalties Corp

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.

Sitio Royalties Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sitio Royalties Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Netflix and Sitio Royalties

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

The idea behind Netflix and Sitio Royalties Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.