Correlation Between Formula Systems and Netflix
Can any of the company-specific risk be diversified away by investing in both Formula Systems 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 Formula Systems and Netflix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formula Systems 1985 and Netflix, you can compare the effects of market volatilities on Formula Systems 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 Formula Systems with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formula Systems and Netflix.
Diversification Opportunities for Formula Systems and Netflix
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Formula and Netflix is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Formula Systems 1985 and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Formula Systems 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 Formula Systems 1985 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 Formula Systems i.e., Formula Systems and Netflix go up and down completely randomly.
Pair Corralation between Formula Systems and Netflix
Assuming the 90 days horizon Formula Systems is expected to generate 2.22 times less return on investment than Netflix. In addition to that, Formula Systems is 1.33 times more volatile than Netflix. It trades about 0.05 of its total potential returns per unit of risk. Netflix is currently generating about 0.15 per unit of volatility. If you would invest 48,688 in Netflix on August 25, 2024 and sell it today you would earn a total of 41,091 from holding Netflix or generate 84.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formula Systems 1985 vs. Netflix
Performance |
| Timeline |
| Formula Systems 1985 |
| Netflix |
Formula Systems and Netflix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formula Systems and Netflix
The main advantage of trading using opposite Formula Systems and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formula Systems 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.| Formula Systems vs. Data Storage Corp | Formula Systems vs. Usio Inc | Formula Systems vs. ARB IOT Group | Formula Systems vs. FiscalNote Holdings |
| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |