Correlation Between Netflix and Wave Electronics
Can any of the company-specific risk be diversified away by investing in both Netflix and Wave Electronics 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 Wave Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Wave Electronics Co, you can compare the effects of market volatilities on Netflix and Wave Electronics 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 Wave Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Wave Electronics.
Diversification Opportunities for Netflix and Wave Electronics
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Netflix and Wave is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Wave Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wave Electronics 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 Wave Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wave Electronics has no effect on the direction of Netflix i.e., Netflix and Wave Electronics go up and down completely randomly.
Pair Corralation between Netflix and Wave Electronics
Given the investment horizon of 90 days Netflix is expected to generate 0.79 times more return on investment than Wave Electronics. However, Netflix is 1.27 times less risky than Wave Electronics. It trades about 0.11 of its potential returns per unit of risk. Wave Electronics Co is currently generating about -0.02 per unit of risk. If you would invest 33,282 in Netflix on September 4, 2024 and sell it today you would earn a total of 56,492 from holding Netflix or generate 169.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 97.26% |
| Values | Daily Returns |
Netflix vs. Wave Electronics Co
Performance |
| Timeline |
| Netflix |
| Wave Electronics |
Netflix and Wave Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Wave Electronics
The main advantage of trading using opposite Netflix and Wave Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Wave Electronics 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 Wave Electronics will offset losses from the drop in Wave Electronics' long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| Wave Electronics vs. Dongsin Engineering Construction | Wave Electronics vs. Doosan Fuel Cell | Wave Electronics vs. Daishin Balance 1 | Wave Electronics vs. Total Soft Bank |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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