Correlation Between Netflix and Amazon
Can any of the company-specific risk be diversified away by investing in both Netflix and Amazon 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 Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Amazon Inc, you can compare the effects of market volatilities on Netflix and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Amazon.
Diversification Opportunities for Netflix and Amazon
Very poor diversification
The 3 months correlation between Netflix and Amazon is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Netflix i.e., Netflix and Amazon go up and down completely randomly.
Pair Corralation between Netflix and Amazon
Assuming the 90 days trading horizon Netflix is expected to generate 0.64 times more return on investment than Amazon. However, Netflix is 1.57 times less risky than Amazon. It trades about 0.62 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.18 per unit of risk. If you would invest 1,494,601 in Netflix on August 25, 2024 and sell it today you would earn a total of 345,749 from holding Netflix or generate 23.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. Amazon Inc
Performance |
| Timeline |
| Netflix |
| Amazon Inc |
Netflix and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Amazon
The main advantage of trading using opposite Netflix and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| Netflix vs. The Walt Disney | Netflix vs. Megacable Holdings S | Netflix vs. The Select Sector | Netflix vs. Promotora y Operadora |
| Amazon vs. Samsung Electronics Co | Amazon vs. FibraHotel | Amazon vs. McEwen Mining | Amazon vs. The Bank of |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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