Correlation Between Netflix and HeidelbergCement

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Can any of the company-specific risk be diversified away by investing in both Netflix and HeidelbergCement 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 HeidelbergCement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and HeidelbergCement India Limited, you can compare the effects of market volatilities on Netflix and HeidelbergCement 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 HeidelbergCement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and HeidelbergCement.

Diversification Opportunities for Netflix and HeidelbergCement

-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between Netflix and HeidelbergCement is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and HeidelbergCement India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeidelbergCement India 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 HeidelbergCement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeidelbergCement India has no effect on the direction of Netflix i.e., Netflix and HeidelbergCement go up and down completely randomly.

Pair Corralation between Netflix and HeidelbergCement

Given the investment horizon of 90 days Netflix is expected to generate 1.07 times more return on investment than HeidelbergCement. However, Netflix is 1.07 times more volatile than HeidelbergCement India Limited. It trades about 0.26 of its potential returns per unit of risk. HeidelbergCement India Limited is currently generating about 0.03 per unit of risk. If you would invest  68,680  in Netflix on September 12, 2024 and sell it today you would earn a total of  24,976  from holding Netflix or generate 36.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.44%
ValuesDaily Returns

Netflix  vs.  HeidelbergCement India Limited

 Performance 
       Timeline  
Netflix 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.
HeidelbergCement India 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in HeidelbergCement India Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, HeidelbergCement is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Netflix and HeidelbergCement Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Netflix and HeidelbergCement

The main advantage of trading using opposite Netflix and HeidelbergCement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, HeidelbergCement 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 HeidelbergCement will offset losses from the drop in HeidelbergCement's long position.
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The idea behind Netflix and HeidelbergCement India Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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