Correlation Between Netflix and American Funds
Can any of the company-specific risk be diversified away by investing in both Netflix and American Funds 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 American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and American Funds Growth, you can compare the effects of market volatilities on Netflix and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and American Funds.
Diversification Opportunities for Netflix and American Funds
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Netflix and American is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and American Funds Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Growth 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Growth has no effect on the direction of Netflix i.e., Netflix and American Funds go up and down completely randomly.
Pair Corralation between Netflix and American Funds
Given the investment horizon of 90 days Netflix is expected to generate 2.83 times more return on investment than American Funds. However, Netflix is 2.83 times more volatile than American Funds Growth. It trades about 0.55 of its potential returns per unit of risk. American Funds Growth is currently generating about 0.29 per unit of risk. If you would invest 75,551 in Netflix on September 3, 2024 and sell it today you would earn a total of 13,130 from holding Netflix or generate 17.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. American Funds Growth
Performance |
| Timeline |
| Netflix |
| American Funds Growth |
Netflix and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and American Funds
The main advantage of trading using opposite Netflix and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| American Funds vs. American Funds The | American Funds vs. American Funds The | American Funds vs. Income Fund Of | American Funds vs. Income Fund Of |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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