Correlation Between Netflix and Formula Systems
Can any of the company-specific risk be diversified away by investing in both Netflix and Formula 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 Formula Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Formula Systems 1985, you can compare the effects of market volatilities on Netflix and Formula 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 Formula Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Formula Systems.
Diversification Opportunities for Netflix and Formula Systems
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Netflix and Formula is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Formula Systems 1985 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formula Systems 1985 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 Formula Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formula Systems 1985 has no effect on the direction of Netflix i.e., Netflix and Formula Systems go up and down completely randomly.
Pair Corralation between Netflix and Formula Systems
Given the investment horizon of 90 days Netflix is expected to generate 0.75 times more return on investment than Formula Systems. However, Netflix is 1.33 times less risky than Formula Systems. It trades about 0.15 of its potential returns per unit of risk. Formula Systems 1985 is currently generating about 0.05 per unit of risk. If you would invest 48,688 in Netflix on August 25, 2024 and sell it today you would earn a total of 41,091 from holding Netflix or generate 84.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. Formula Systems 1985
Performance |
| Timeline |
| Netflix |
| Formula Systems 1985 |
Netflix and Formula Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Formula Systems
The main advantage of trading using opposite Netflix and Formula Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Formula 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 Formula Systems will offset losses from the drop in Formula Systems' long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| Formula Systems vs. Data Storage Corp | Formula Systems vs. Usio Inc | Formula Systems vs. ARB IOT Group | Formula Systems vs. FiscalNote Holdings |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |