Correlation Between Netflix and Baxter International
Can any of the company-specific risk be diversified away by investing in both Netflix and Baxter International 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 Baxter International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Baxter International, you can compare the effects of market volatilities on Netflix and Baxter International 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 Baxter International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Baxter International.
Diversification Opportunities for Netflix and Baxter International
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Netflix and Baxter is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Baxter International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baxter International 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 Baxter International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baxter International has no effect on the direction of Netflix i.e., Netflix and Baxter International go up and down completely randomly.
Pair Corralation between Netflix and Baxter International
Assuming the 90 days trading horizon Netflix is expected to generate 1.29 times more return on investment than Baxter International. However, Netflix is 1.29 times more volatile than Baxter International. It trades about 0.33 of its potential returns per unit of risk. Baxter International is currently generating about -0.23 per unit of risk. If you would invest 1,634,888 in Netflix on September 12, 2024 and sell it today you would earn a total of 256,635 from holding Netflix or generate 15.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. Baxter International
Performance |
| Timeline |
| Netflix |
| Baxter International |
Netflix and Baxter International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Baxter International
The main advantage of trading using opposite Netflix and Baxter International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Baxter International 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 Baxter International will offset losses from the drop in Baxter International's long position.The idea behind Netflix and Baxter International 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.| Baxter International vs. Verizon Communications | Baxter International vs. KB Home | Baxter International vs. Costco Wholesale | Baxter International vs. Grupo Hotelero Santa |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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