Correlation Between Netflix and Innovator

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

By analyzing existing cross correlation between Netflix and Innovator 20 Year, you can compare the effects of market volatilities on Netflix and Innovator 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 Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Innovator.

Diversification Opportunities for Netflix and Innovator

-0.61

Correlation Coefficient

Netflix  Innovator

Excellent diversification

The 3 months correlation between Netflix and Innovator is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Innovator 20 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator 20 Year 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 Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator 20 Year has no effect on the direction of Netflix i.e., Netflix and Innovator go up and down completely randomly.

Pair Corralation between Netflix and Innovator

Given the investment horizon of 90 days Netflix is expected to generate 2.76 times more return on investment than Innovator. However, Netflix is 2.76 times more volatile than Innovator 20 Year. It trades about 0.11 of its potential returns per unit of risk. Innovator 20 Year is currently generating about 0.0 per unit of risk. If you would invest  43,470  in Netflix on September 12, 2024 and sell it today you would earn a total of  47,865  from holding Netflix or generate 110.11% return on investment over 90 days.

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

Netflix  vs.  Innovator 20 Year

Netflix

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 19 (%) 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.

Innovator 20 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovator 20 Year has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking indicators, Innovator is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Netflix and Innovator

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

The idea behind Netflix and Innovator 20 Year 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.