Correlation Between Netflix and ViacomCBS
Can any of the company-specific risk be diversified away by investing in both Netflix and ViacomCBS 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 Netflix and ViacomCBS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and ViacomCBS, you can compare the effects of market volatilities on Netflix and ViacomCBS 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 Netflix with a short position of ViacomCBS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and ViacomCBS.
Diversification Opportunities for Netflix and ViacomCBS
Almost no diversification
The 3 months correlation between Netflix and ViacomCBS is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and ViacomCBS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ViacomCBS and Netflix 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 Netflix are associated (or correlated) with ViacomCBS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ViacomCBS has no effect on the direction of Netflix i.e., Netflix and ViacomCBS go up and down completely randomly.
Pair Corralation between Netflix and ViacomCBS
Assuming the 90 days horizon Netflix is expected to generate 0.63 times more return on investment than ViacomCBS. However, Netflix is 1.58 times less risky than ViacomCBS. It trades about 0.11 of its potential returns per unit of risk. ViacomCBS is currently generating about 0.02 per unit of risk. If you would invest 29,440 in Netflix on September 2, 2024 and sell it today you would earn a total of 54,310 from holding Netflix or generate 184.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. ViacomCBS
Performance |
| Timeline |
| Netflix |
| ViacomCBS |
Netflix and ViacomCBS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and ViacomCBS
The main advantage of trading using opposite Netflix and ViacomCBS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, ViacomCBS 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 ViacomCBS will offset losses from the drop in ViacomCBS's long position.| Netflix vs. Sanyo Chemical Industries | Netflix vs. Datadog | Netflix vs. TERADATA | Netflix vs. Mitsubishi Gas Chemical |
| ViacomCBS vs. Netflix | ViacomCBS vs. Warner Music Group | ViacomCBS vs. Superior Plus Corp | ViacomCBS vs. NMI 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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