Correlation Between Netflix and NVIDIA
Can any of the company-specific risk be diversified away by investing in both Netflix and NVIDIA 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 NVIDIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and NVIDIA, you can compare the effects of market volatilities on Netflix and NVIDIA 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 NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and NVIDIA.
Diversification Opportunities for Netflix and NVIDIA
Modest diversification
The 3 months correlation between Netflix and NVIDIA is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA 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 NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of Netflix i.e., Netflix and NVIDIA go up and down completely randomly.
Pair Corralation between Netflix and NVIDIA
Given the investment horizon of 90 days Netflix is expected to generate 0.66 times more return on investment than NVIDIA. However, Netflix is 1.51 times less risky than NVIDIA. It trades about 0.45 of its potential returns per unit of risk. NVIDIA is currently generating about -0.22 per unit of risk. If you would invest 80,544 in Netflix on September 12, 2024 and sell it today you would earn a total of 13,112 from holding Netflix or generate 16.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. NVIDIA
Performance |
| Timeline |
| Netflix |
| NVIDIA |
Netflix and NVIDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and NVIDIA
The main advantage of trading using opposite Netflix and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, NVIDIA 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 NVIDIA will offset losses from the drop in NVIDIA's long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| NVIDIA vs. Harmony Gold Mining | NVIDIA vs. Telecom Argentina | NVIDIA vs. Transportadora de Gas | NVIDIA vs. United States Steel |
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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