Correlation Between Applied Materials and Netflix
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and Netflix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Netflix, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Netflix.
Diversification Opportunities for Applied Materials and Netflix
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and Netflix is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and Netflix go up and down completely randomly.
Pair Corralation between Applied Materials and Netflix
Assuming the 90 days trading horizon Applied Materials is expected to generate 31.89 times less return on investment than Netflix. In addition to that, Applied Materials is 1.46 times more volatile than Netflix. It trades about 0.01 of its total potential returns per unit of risk. Netflix is currently generating about 0.42 per unit of volatility. If you would invest 1,514,492 in Netflix on September 1, 2024 and sell it today you would earn a total of 292,508 from holding Netflix or generate 19.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Netflix
Performance |
| Timeline |
| Applied Materials |
| Netflix |
Applied Materials and Netflix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Netflix
The main advantage of trading using opposite Applied Materials and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. FIBRA Storage | Applied Materials vs. Monster Beverage Corp | Applied Materials vs. GMxico Transportes SAB | Applied Materials vs. Costco Wholesale |
| Netflix vs. Prudential Financial | Netflix vs. Southwest Airlines | Netflix vs. United Airlines Holdings | Netflix vs. Grupo Sports World |
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 Stocks Directory module to find actively traded stocks across global markets.
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