Correlation Between Fortinet and Netflix
Can any of the company-specific risk be diversified away by investing in both Fortinet 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 Fortinet and Netflix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortinet and Netflix, you can compare the effects of market volatilities on Fortinet 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 Fortinet with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortinet and Netflix.
Diversification Opportunities for Fortinet and Netflix
Very poor diversification
The 3 months correlation between Fortinet and Netflix is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Fortinet and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Fortinet 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 Fortinet 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 Fortinet i.e., Fortinet and Netflix go up and down completely randomly.
Pair Corralation between Fortinet and Netflix
Given the investment horizon of 90 days Fortinet is expected to generate 2.02 times more return on investment than Netflix. However, Fortinet is 2.02 times more volatile than Netflix. It trades about 0.24 of its potential returns per unit of risk. Netflix is currently generating about 0.46 per unit of risk. If you would invest 8,076 in Fortinet on August 27, 2024 and sell it today you would earn a total of 1,236 from holding Fortinet or generate 15.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortinet vs. Netflix
Performance |
| Timeline |
| Fortinet |
| Netflix |
Fortinet and Netflix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortinet and Netflix
The main advantage of trading using opposite Fortinet and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortinet 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 Fortinet 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.| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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