Correlation Between Netflix and China Mengniu
Can any of the company-specific risk be diversified away by investing in both Netflix and China Mengniu 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 China Mengniu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and China Mengniu Dairy, you can compare the effects of market volatilities on Netflix and China Mengniu 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 China Mengniu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and China Mengniu.
Diversification Opportunities for Netflix and China Mengniu
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Netflix and China is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and China Mengniu Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mengniu Dairy 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 China Mengniu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Mengniu Dairy has no effect on the direction of Netflix i.e., Netflix and China Mengniu go up and down completely randomly.
Pair Corralation between Netflix and China Mengniu
Given the investment horizon of 90 days Netflix is expected to generate 0.42 times more return on investment than China Mengniu. However, Netflix is 2.39 times less risky than China Mengniu. It trades about 0.49 of its potential returns per unit of risk. China Mengniu Dairy is currently generating about 0.04 per unit of risk. If you would invest 75,374 in Netflix on August 31, 2024 and sell it today you would earn a total of 12,360 from holding Netflix or generate 16.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. China Mengniu Dairy
Performance |
| Timeline |
| Netflix |
| China Mengniu Dairy |
Netflix and China Mengniu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and China Mengniu
The main advantage of trading using opposite Netflix and China Mengniu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, China Mengniu 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 China Mengniu will offset losses from the drop in China Mengniu's long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| China Mengniu vs. The A2 Milk | China Mengniu vs. Altavoz Entertainment | China Mengniu vs. Artisan Consumer Goods | China Mengniu vs. General Mills |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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