Correlation Between Netflix and Central Japan
Can any of the company-specific risk be diversified away by investing in both Netflix and Central Japan 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 Central Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Central Japan Railway, you can compare the effects of market volatilities on Netflix and Central Japan 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 Central Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Central Japan.
Diversification Opportunities for Netflix and Central Japan
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Netflix and Central is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Central Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Japan Railway 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 Central Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Japan Railway has no effect on the direction of Netflix i.e., Netflix and Central Japan go up and down completely randomly.
Pair Corralation between Netflix and Central Japan
Given the investment horizon of 90 days Netflix is expected to generate 139.89 times less return on investment than Central Japan. But when comparing it to its historical volatility, Netflix is 58.31 times less risky than Central Japan. It trades about 0.1 of its potential returns per unit of risk. Central Japan Railway is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 12,000 in Central Japan Railway on September 3, 2024 and sell it today you would lose (9,441) from holding Central Japan Railway or give up 78.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 46.26% |
| Values | Daily Returns |
Netflix vs. Central Japan Railway
Performance |
| Timeline |
| Netflix |
| Central Japan Railway |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Netflix and Central Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Central Japan
The main advantage of trading using opposite Netflix and Central Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Central Japan 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 Central Japan will offset losses from the drop in Central Japan's long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| Central Japan vs. West Japan Railway | Central Japan vs. Central Japan Railway | Central Japan vs. LB Foster |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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