Correlation Between Netflix and Warner Music
Can any of the company-specific risk be diversified away by investing in both Netflix and Warner Music 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 Warner Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Warner Music Group, you can compare the effects of market volatilities on Netflix and Warner Music 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 Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Warner Music.
Diversification Opportunities for Netflix and Warner Music
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Netflix and Warner is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Netflix i.e., Netflix and Warner Music go up and down completely randomly.
Pair Corralation between Netflix and Warner Music
Assuming the 90 days horizon Netflix is expected to generate 1.0 times more return on investment than Warner Music. However, Netflix is 1.0 times more volatile than Warner Music Group. It trades about 0.16 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.03 per unit of risk. If you would invest 86,310 in Netflix on November 3, 2024 and sell it today you would earn a total of 7,460 from holding Netflix or generate 8.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. Warner Music Group
Performance |
| Timeline |
| Netflix |
| Warner Music Group |
Netflix and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Warner Music
The main advantage of trading using opposite Netflix and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music's long position.| Netflix vs. H2O Retailing | Netflix vs. Neinor Homes SA | Netflix vs. The Trade Desk | Netflix vs. CANON MARKETING JP |
| Warner Music vs. Autohome ADR | Warner Music vs. INVITATION HOMES DL | Warner Music vs. MEDICAL FACILITIES NEW | Warner Music vs. ADDUS HOMECARE |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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