Correlation Between Prudential Plc and Netflix

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

By analyzing existing cross correlation between Prudential plc and Netflix, you can compare the effects of market volatilities on Prudential Plc and Netflix 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 Prudential Plc with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Plc and Netflix.

Diversification Opportunities for Prudential Plc and Netflix

0.0

Correlation Coefficient

Prudential Plc  Netflix

Pay attention - limited upside

The 3 months correlation between Prudential and Netflix is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Prudential plc and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Prudential Plc 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 Prudential plc are associated (or correlated) with Netflix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netflix has no effect on the direction of Prudential Plc i.e., Prudential Plc and Netflix go up and down completely randomly.

Pair Corralation between Prudential Plc and Netflix

Assuming the 90 days trading horizon Prudential plc is not expected to generate positive returns. However, Prudential plc is 359.53 times less risky than Netflix. It waists most of its returns potential to compensate for thr risk taken. Netflix is generating about 0.1 per unit of risk. If you would invest  671,600  in Netflix on October 12, 2024 and sell it today you would earn a total of  1,073,881  from holding Netflix or generate 159.9% return on investment over 90 days.

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

Prudential plc  vs.  Netflix

Prudential plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Prudential Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Netflix

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prudential Plc and Netflix

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

The idea behind Prudential plc and Netflix 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.