Correlation Between Sitio Royalties and Netflix

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

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

Diversification Opportunities for Sitio Royalties and Netflix

-0.42

Correlation Coefficient

Sitio Royalties  Netflix

Very good diversification

The 3 months correlation between Sitio and Netflix is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sitio Royalties Corp and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Sitio Royalties 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 Sitio Royalties Corp 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 Sitio Royalties i.e., Sitio Royalties and Netflix go up and down completely randomly.

Pair Corralation between Sitio Royalties and Netflix

Considering the 90-day investment horizon Sitio Royalties is expected to generate 15.37 times less return on investment than Netflix. But when comparing it to its historical volatility, Sitio Royalties Corp is 1.07 times less risky than Netflix. It trades about 0.01 of its potential returns per unit of risk. Netflix is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  29,276  in Netflix on November 29, 2024 and sell it today you would earn a total of  67,009  from holding Netflix or generate 228.89% return on investment over 90 days.

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

Sitio Royalties Corp  vs.  Netflix

Sitio Royalties Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sitio Royalties Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Netflix

Risk-Adjusted Performance

OK

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 March 2025.

Pair Trading with Sitio Royalties and Netflix

The main advantage of trading using opposite Sitio Royalties and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sitio Royalties 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 Sitio Royalties Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.