Correlation Between Netflix and Hennessy Gas
Can any of the company-specific risk be diversified away by investing in both Netflix and Hennessy Gas 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 Hennessy Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Hennessy Gas Utility, you can compare the effects of market volatilities on Netflix and Hennessy Gas 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 Hennessy Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Hennessy Gas.
Diversification Opportunities for Netflix and Hennessy Gas
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Netflix and Hennessy is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Hennessy Gas Utility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Gas Utility 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 Hennessy Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Gas Utility has no effect on the direction of Netflix i.e., Netflix and Hennessy Gas go up and down completely randomly.
Pair Corralation between Netflix and Hennessy Gas
Given the investment horizon of 90 days Netflix is expected to generate 1.6 times more return on investment than Hennessy Gas. However, Netflix is 1.6 times more volatile than Hennessy Gas Utility. It trades about 0.59 of its potential returns per unit of risk. Hennessy Gas Utility is currently generating about 0.43 per unit of risk. If you would invest 75,551 in Netflix on September 5, 2024 and sell it today you would earn a total of 14,666 from holding Netflix or generate 19.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. Hennessy Gas Utility
Performance |
| Timeline |
| Netflix |
| Hennessy Gas Utility |
Netflix and Hennessy Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Hennessy Gas
The main advantage of trading using opposite Netflix and Hennessy Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Hennessy Gas 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 Hennessy Gas will offset losses from the drop in Hennessy Gas' long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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