Correlation Between Netflix and Associated British
Can any of the company-specific risk be diversified away by investing in both Netflix and Associated British 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 Associated British into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Associated British Foods, you can compare the effects of market volatilities on Netflix and Associated British 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 Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Associated British.
Diversification Opportunities for Netflix and Associated British
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Netflix and Associated is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods 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 Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Netflix i.e., Netflix and Associated British go up and down completely randomly.
Pair Corralation between Netflix and Associated British
Given the investment horizon of 90 days Netflix is expected to generate 1.47 times more return on investment than Associated British. However, Netflix is 1.47 times more volatile than Associated British Foods. It trades about 0.11 of its potential returns per unit of risk. Associated British Foods is currently generating about 0.04 per unit of risk. If you would invest 43,470 in Netflix on September 12, 2024 and sell it today you would earn a total of 47,865 from holding Netflix or generate 110.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.9% |
| Values | Daily Returns |
Netflix vs. Associated British Foods
Performance |
| Timeline |
| Netflix |
| Associated British Foods |
Netflix and Associated British Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Associated British
The main advantage of trading using opposite Netflix and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| Associated British vs. Carsales | Associated British vs. Sunstone Hotel Investors | Associated British vs. Xenia Hotels Resorts | Associated British vs. Salesforce |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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