Correlation Between Microsoft and Netflix
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Netflix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Netflix, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Netflix.
Diversification Opportunities for Microsoft and Netflix
Poor diversification
The 3 months correlation between Microsoft and Netflix is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Netflix go up and down completely randomly.
Pair Corralation between Microsoft and Netflix
Assuming the 90 days trading horizon Microsoft is expected to generate 7.63 times less return on investment than Netflix. In addition to that, Microsoft is 1.1 times more volatile than Netflix. It trades about 0.06 of its total potential returns per unit of risk. Netflix is currently generating about 0.52 per unit of volatility. If you would invest 8,526 in Netflix on August 28, 2024 and sell it today you would earn a total of 1,665 from holding Netflix or generate 19.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Netflix
Performance |
| Timeline |
| Microsoft |
| Netflix |
Microsoft and Netflix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Netflix
The main advantage of trading using opposite Microsoft and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Unity Software | Microsoft vs. Mangels Industrial SA | Microsoft vs. Telecomunicaes Brasileiras SA | Microsoft vs. Unifique Telecomunicaes SA |
| Netflix vs. Energisa SA | Netflix vs. BTG Pactual Logstica | Netflix vs. Plano Plano Desenvolvimento | Netflix vs. Companhia Habitasul de |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Stocks Directory Find actively traded stocks across global markets | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |