Correlation Between Netflix and 40434LAB1

Can any of the company-specific risk be diversified away by investing in both Netflix and 40434LAB1 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 40434LAB1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Netflix and HP INC, you can compare the effects of market volatilities on Netflix and 40434LAB1 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 40434LAB1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and 40434LAB1.

Diversification Opportunities for Netflix and 40434LAB1

-0.66

Correlation Coefficient

Netflix  40434LAB1

Excellent diversification

The 3 months correlation between Netflix and 40434LAB1 is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and HP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 40434LAB1 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 40434LAB1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 40434LAB1 has no effect on the direction of Netflix i.e., Netflix and 40434LAB1 go up and down completely randomly.

Pair Corralation between Netflix and 40434LAB1

Given the investment horizon of 90 days Netflix is expected to generate 2.86 times more return on investment than 40434LAB1. However, Netflix is 2.86 times more volatile than HP INC. It trades about 0.23 of its potential returns per unit of risk. HP INC is currently generating about -0.14 per unit of risk. If you would invest  69,650  in Netflix on September 15, 2024 and sell it today you would earn a total of  22,237  from holding Netflix or generate 31.93% return on investment over 90 days.

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

Netflix  vs.  HP INC

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.

40434LAB1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HP INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 40434LAB1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Netflix and 40434LAB1

The main advantage of trading using opposite Netflix and 40434LAB1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, 40434LAB1 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 40434LAB1 will offset losses from the drop in 40434LAB1's long position.

The idea behind Netflix and HP INC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.