Correlation Between Netflix and APx Acquisition
Can any of the company-specific risk be diversified away by investing in both Netflix and APx Acquisition 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 APx Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and APx Acquisition I, you can compare the effects of market volatilities on Netflix and APx Acquisition 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 APx Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and APx Acquisition.
Diversification Opportunities for Netflix and APx Acquisition
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Netflix and APx is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and APx Acquisition I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APx Acquisition I 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 APx Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APx Acquisition I has no effect on the direction of Netflix i.e., Netflix and APx Acquisition go up and down completely randomly.
Pair Corralation between Netflix and APx Acquisition
Given the investment horizon of 90 days Netflix is expected to generate 1.38 times more return on investment than APx Acquisition. However, Netflix is 1.38 times more volatile than APx Acquisition I. It trades about 0.45 of its potential returns per unit of risk. APx Acquisition I is currently generating about 0.02 per unit of risk. If you would invest 80,544 in Netflix on September 12, 2024 and sell it today you would earn a total of 13,486 from holding Netflix or generate 16.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. APx Acquisition I
Performance |
| Timeline |
| Netflix |
| APx Acquisition I |
Netflix and APx Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and APx Acquisition
The main advantage of trading using opposite Netflix and APx Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, APx Acquisition 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 APx Acquisition will offset losses from the drop in APx Acquisition's long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| APx Acquisition vs. HUMANA INC | APx Acquisition vs. Barloworld Ltd ADR | APx Acquisition vs. Morningstar Unconstrained Allocation | APx Acquisition vs. Thrivent High Yield |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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