Correlation Between Netflix and Kao
Can any of the company-specific risk be diversified away by investing in both Netflix and Kao 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 Kao into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Kao Corporation, you can compare the effects of market volatilities on Netflix and Kao 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 Kao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Kao.
Diversification Opportunities for Netflix and Kao
Very good diversification
The 3 months correlation between Netflix and Kao is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Kao Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kao Corporation 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 Kao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kao Corporation has no effect on the direction of Netflix i.e., Netflix and Kao go up and down completely randomly.
Pair Corralation between Netflix and Kao
Given the investment horizon of 90 days Netflix is expected to generate 21.25 times less return on investment than Kao. But when comparing it to its historical volatility, Netflix is 2.5 times less risky than Kao. It trades about 0.03 of its potential returns per unit of risk. Kao Corporation is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,695 in Kao Corporation on December 1, 2024 and sell it today you would earn a total of 801.00 from holding Kao Corporation or generate 21.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. Kao Corp.
Performance |
| Timeline |
| Netflix |
| Kao Corporation |
Netflix and Kao Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Kao
The main advantage of trading using opposite Netflix and Kao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Kao 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 Kao will offset losses from the drop in Kao's long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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