Correlation Between ViacomCBS and Netflix
Can any of the company-specific risk be diversified away by investing in both ViacomCBS 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 ViacomCBS and Netflix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ViacomCBS and Netflix, you can compare the effects of market volatilities on ViacomCBS 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 ViacomCBS with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of ViacomCBS and Netflix.
Diversification Opportunities for ViacomCBS and Netflix
Very poor diversification
The 3 months correlation between ViacomCBS and Netflix is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ViacomCBS and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and ViacomCBS 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 ViacomCBS 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 ViacomCBS i.e., ViacomCBS and Netflix go up and down completely randomly.
Pair Corralation between ViacomCBS and Netflix
Assuming the 90 days horizon ViacomCBS is expected to generate 2.78 times less return on investment than Netflix. In addition to that, ViacomCBS is 1.19 times more volatile than Netflix. It trades about 0.15 of its total potential returns per unit of risk. Netflix is currently generating about 0.49 per unit of volatility. If you would invest 69,280 in Netflix on August 29, 2024 and sell it today you would earn a total of 14,010 from holding Netflix or generate 20.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ViacomCBS vs. Netflix
Performance |
| Timeline |
| ViacomCBS |
| Netflix |
ViacomCBS and Netflix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ViacomCBS and Netflix
The main advantage of trading using opposite ViacomCBS and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ViacomCBS 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.| ViacomCBS vs. Australian Agricultural | ViacomCBS vs. Columbia Sportswear | ViacomCBS vs. WIMFARM SA EO | ViacomCBS vs. Penta Ocean Construction Co |
| Netflix vs. The Walt Disney | Netflix vs. Superior Plus Corp | Netflix vs. NMI Holdings | Netflix vs. Origin Agritech |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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