Correlation Between Netflix and 3D Systems
Can any of the company-specific risk be diversified away by investing in both Netflix and 3D Systems 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 3D Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and 3D Systems, you can compare the effects of market volatilities on Netflix and 3D Systems 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 3D Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and 3D Systems.
Diversification Opportunities for Netflix and 3D Systems
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Netflix and DDD is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and 3D Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3D Systems 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 3D Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3D Systems has no effect on the direction of Netflix i.e., Netflix and 3D Systems go up and down completely randomly.
Pair Corralation between Netflix and 3D Systems
Given the investment horizon of 90 days Netflix is expected to generate 1.91 times less return on investment than 3D Systems. But when comparing it to its historical volatility, Netflix is 2.9 times less risky than 3D Systems. It trades about 0.23 of its potential returns per unit of risk. 3D Systems is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 191.00 in 3D Systems on September 2, 2024 and sell it today you would earn a total of 106.00 from holding 3D Systems or generate 55.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. 3D Systems
Performance |
| Timeline |
| Netflix |
| 3D Systems |
Netflix and 3D Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and 3D Systems
The main advantage of trading using opposite Netflix and 3D Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, 3D Systems 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 3D Systems will offset losses from the drop in 3D Systems' long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| 3D Systems vs. Ehang Holdings | 3D Systems vs. Vislink Technologies | 3D Systems vs. Foresight Autonomous Holdings | 3D Systems vs. Aquagold International |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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