Correlation Between Netflix and Bristol-Myers Squibb
Can any of the company-specific risk be diversified away by investing in both Netflix and Bristol-Myers Squibb 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 Bristol-Myers Squibb into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Bristol Myers Squibb, you can compare the effects of market volatilities on Netflix and Bristol-Myers Squibb 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 Bristol-Myers Squibb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Bristol-Myers Squibb.
Diversification Opportunities for Netflix and Bristol-Myers Squibb
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Netflix and Bristol-Myers is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Bristol Myers Squibb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bristol Myers Squibb 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 Bristol-Myers Squibb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bristol Myers Squibb has no effect on the direction of Netflix i.e., Netflix and Bristol-Myers Squibb go up and down completely randomly.
Pair Corralation between Netflix and Bristol-Myers Squibb
Given the investment horizon of 90 days Netflix is expected to generate 0.56 times more return on investment than Bristol-Myers Squibb. However, Netflix is 1.77 times less risky than Bristol-Myers Squibb. It trades about 0.23 of its potential returns per unit of risk. Bristol Myers Squibb is currently generating about 0.12 per unit of risk. If you would invest 67,532 in Netflix on September 2, 2024 and sell it today you would earn a total of 21,149 from holding Netflix or generate 31.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.44% |
| Values | Daily Returns |
Netflix vs. Bristol Myers Squibb
Performance |
| Timeline |
| Netflix |
| Bristol Myers Squibb |
Netflix and Bristol-Myers Squibb Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Bristol-Myers Squibb
The main advantage of trading using opposite Netflix and Bristol-Myers Squibb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Bristol-Myers Squibb 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 Bristol-Myers Squibb will offset losses from the drop in Bristol-Myers Squibb's long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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