Correlation Between Netflix and Cinemark Holdings
Can any of the company-specific risk be diversified away by investing in both Netflix and Cinemark Holdings 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 Cinemark Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Cinemark Holdings, you can compare the effects of market volatilities on Netflix and Cinemark Holdings 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 Cinemark Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Cinemark Holdings.
Diversification Opportunities for Netflix and Cinemark Holdings
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Netflix and Cinemark is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Cinemark Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cinemark Holdings 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 Cinemark Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cinemark Holdings has no effect on the direction of Netflix i.e., Netflix and Cinemark Holdings go up and down completely randomly.
Pair Corralation between Netflix and Cinemark Holdings
Given the investment horizon of 90 days Netflix is expected to generate 2.85 times more return on investment than Cinemark Holdings. However, Netflix is 2.85 times more volatile than Cinemark Holdings. It trades about 0.21 of its potential returns per unit of risk. Cinemark Holdings is currently generating about -0.43 per unit of risk. If you would invest 88,105 in Netflix on November 4, 2024 and sell it today you would earn a total of 9,571 from holding Netflix or generate 10.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. Cinemark Holdings
Performance |
| Timeline |
| Netflix |
| Cinemark Holdings |
Netflix and Cinemark Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Cinemark Holdings
The main advantage of trading using opposite Netflix and Cinemark Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Cinemark Holdings 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 Cinemark Holdings will offset losses from the drop in Cinemark Holdings' long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| Cinemark Holdings vs. News Corp B | Cinemark Holdings vs. Marcus | Cinemark Holdings vs. Liberty Media | Cinemark Holdings vs. Warner Music Group |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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