Correlation Between Netflix and Small Cap
Can any of the company-specific risk be diversified away by investing in both Netflix and Small Cap 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 Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Small Cap Value, you can compare the effects of market volatilities on Netflix and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Small Cap.
Diversification Opportunities for Netflix and Small Cap
Very poor diversification
The 3 months correlation between Netflix and SMALL is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Netflix i.e., Netflix and Small Cap go up and down completely randomly.
Pair Corralation between Netflix and Small Cap
Given the investment horizon of 90 days Netflix is expected to generate 1.69 times more return on investment than Small Cap. However, Netflix is 1.69 times more volatile than Small Cap Value. It trades about 0.1 of its potential returns per unit of risk. Small Cap Value is currently generating about 0.04 per unit of risk. If you would invest 32,034 in Netflix on September 3, 2024 and sell it today you would earn a total of 56,647 from holding Netflix or generate 176.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. Small Cap Value
Performance |
| Timeline |
| Netflix |
| Small Cap Value |
Netflix and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Small Cap
The main advantage of trading using opposite Netflix and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| Small Cap vs. Vanguard Small Cap Value | Small Cap vs. Vanguard Small Cap Value | Small Cap vs. Us Small Cap | Small Cap vs. Us Targeted Value |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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