Correlation Between Netflix and IShares Small

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

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

Diversification Opportunities for Netflix and IShares Small

-0.19

Correlation Coefficient

Netflix  IShares Small

Good diversification

The 3 months correlation between Netflix and IShares is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and iShares Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Small Cap 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 IShares Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Small Cap has no effect on the direction of Netflix i.e., Netflix and IShares Small go up and down completely randomly.

Pair Corralation between Netflix and IShares Small

Given the investment horizon of 90 days Netflix is expected to generate 1.51 times more return on investment than IShares Small. However, Netflix is 1.51 times more volatile than iShares Small Cap. It trades about 0.02 of its potential returns per unit of risk. iShares Small Cap is currently generating about -0.16 per unit of risk. If you would invest  97,676  in Netflix on December 2, 2024 and sell it today you would earn a total of  380.00  from holding Netflix or generate 0.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Netflix  vs.  iShares Small Cap

Netflix

Risk-Adjusted Performance

Modest

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 April 2025.

iShares Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Etf's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with Netflix and IShares Small

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

The idea behind Netflix and iShares Small Cap 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.