Correlation Between Netflix and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both Netflix and Diamond Hill 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 Diamond Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Diamond Hill Small, you can compare the effects of market volatilities on Netflix and Diamond Hill 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 Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Diamond Hill.
Diversification Opportunities for Netflix and Diamond Hill
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Netflix and Diamond is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Diamond Hill Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Small 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 Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Small has no effect on the direction of Netflix i.e., Netflix and Diamond Hill go up and down completely randomly.
Pair Corralation between Netflix and Diamond Hill
Given the investment horizon of 90 days Netflix is expected to generate 1.33 times more return on investment than Diamond Hill. However, Netflix is 1.33 times more volatile than Diamond Hill Small. It trades about 0.1 of its potential returns per unit of risk. Diamond Hill Small is currently generating about 0.01 per unit of risk. If you would invest 32,034 in Netflix on September 3, 2024 and sell it today you would earn a total of 56,647 from holding Netflix or generate 176.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. Diamond Hill Small
Performance |
| Timeline |
| Netflix |
| Diamond Hill Small |
Netflix and Diamond Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Diamond Hill
The main advantage of trading using opposite Netflix and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Diamond Hill 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 Diamond Hill will offset losses from the drop in Diamond Hill's long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| Diamond Hill vs. Gmo High Yield | Diamond Hill vs. T Rowe Price | Diamond Hill vs. Metropolitan West High | Diamond Hill vs. Needham Aggressive Growth |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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