Correlation Between Netflix and Vanguard Energy

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

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

Diversification Opportunities for Netflix and Vanguard Energy

0.42

Correlation Coefficient

Netflix  Vanguard Energy

Very weak diversification

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

Pair Corralation between Netflix and Vanguard Energy

Given the investment horizon of 90 days Netflix is expected to generate 3.05 times more return on investment than Vanguard Energy. However, Netflix is 3.05 times more volatile than Vanguard Energy Fund. It trades about 0.25 of its potential returns per unit of risk. Vanguard Energy Fund is currently generating about 0.02 per unit of risk. If you would invest  69,706  in Netflix on September 13, 2024 and sell it today you would earn a total of  23,950  from holding Netflix or generate 34.36% return on investment over 90 days.

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

Netflix  vs.  Vanguard Energy Fund

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.

Vanguard Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Energy Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Vanguard Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Netflix and Vanguard Energy

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

The idea behind Netflix and Vanguard Energy Fund 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.