Correlation Between Netflix and DTC Enterprise
Can any of the company-specific risk be diversified away by investing in both Netflix and DTC Enterprise 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 DTC Enterprise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and DTC Enterprise PCL, you can compare the effects of market volatilities on Netflix and DTC Enterprise 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 DTC Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and DTC Enterprise.
Diversification Opportunities for Netflix and DTC Enterprise
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Netflix and DTC is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and DTC Enterprise PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTC Enterprise PCL 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 DTC Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTC Enterprise PCL has no effect on the direction of Netflix i.e., Netflix and DTC Enterprise go up and down completely randomly.
Pair Corralation between Netflix and DTC Enterprise
Given the investment horizon of 90 days Netflix is expected to generate 1.53 times more return on investment than DTC Enterprise. However, Netflix is 1.53 times more volatile than DTC Enterprise PCL. It trades about 0.57 of its potential returns per unit of risk. DTC Enterprise PCL is currently generating about -0.29 per unit of risk. If you would invest 75,551 in Netflix on September 4, 2024 and sell it today you would earn a total of 14,223 from holding Netflix or generate 18.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Netflix vs. DTC Enterprise PCL
Performance |
| Timeline |
| Netflix |
| DTC Enterprise PCL |
Netflix and DTC Enterprise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and DTC Enterprise
The main advantage of trading using opposite Netflix and DTC Enterprise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, DTC Enterprise 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 DTC Enterprise will offset losses from the drop in DTC Enterprise's long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| DTC Enterprise vs. Aurora Design PCL | DTC Enterprise vs. SCG Packaging Public | DTC Enterprise vs. Regional Container Lines | DTC Enterprise vs. Sabuy Technology Public |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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