Correlation Between Netflix and Digital Realty
Can any of the company-specific risk be diversified away by investing in both Netflix and Digital Realty 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 Digital Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Digital Realty Trust, you can compare the effects of market volatilities on Netflix and Digital Realty 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 Digital Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Digital Realty.
Diversification Opportunities for Netflix and Digital Realty
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Netflix and Digital is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Digital Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Realty Trust 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 Digital Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Realty Trust has no effect on the direction of Netflix i.e., Netflix and Digital Realty go up and down completely randomly.
Pair Corralation between Netflix and Digital Realty
Given the investment horizon of 90 days Netflix is expected to generate 0.76 times more return on investment than Digital Realty. However, Netflix is 1.32 times less risky than Digital Realty. It trades about 0.57 of its potential returns per unit of risk. Digital Realty Trust is currently generating about 0.31 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 Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Netflix vs. Digital Realty Trust
Performance |
| Timeline |
| Netflix |
| Digital Realty Trust |
Netflix and Digital Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Digital Realty
The main advantage of trading using opposite Netflix and Digital Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Digital Realty 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 Digital Realty will offset losses from the drop in Digital Realty's long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| Digital Realty vs. ORMAT TECHNOLOGIES | Digital Realty vs. YOOMA WELLNESS INC | Digital Realty vs. Bumrungrad Hospital Public | Digital Realty vs. Axcelis Technologies |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Stocks Directory Find actively traded stocks across global markets | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |