Correlation Between Netflix and Piedmont Lithium
Can any of the company-specific risk be diversified away by investing in both Netflix and Piedmont Lithium 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 Piedmont Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Piedmont Lithium, you can compare the effects of market volatilities on Netflix and Piedmont Lithium 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 Piedmont Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Piedmont Lithium.
Diversification Opportunities for Netflix and Piedmont Lithium
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Netflix and Piedmont is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Piedmont Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piedmont Lithium 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 Piedmont Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piedmont Lithium has no effect on the direction of Netflix i.e., Netflix and Piedmont Lithium go up and down completely randomly.
Pair Corralation between Netflix and Piedmont Lithium
Given the investment horizon of 90 days Netflix is expected to generate 1.66 times less return on investment than Piedmont Lithium. But when comparing it to its historical volatility, Netflix is 5.84 times less risky than Piedmont Lithium. It trades about 0.15 of its potential returns per unit of risk. Piedmont Lithium is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 13.00 in Piedmont Lithium on September 3, 2024 and sell it today you would lose (1.00) from holding Piedmont Lithium or give up 7.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. Piedmont Lithium
Performance |
| Timeline |
| Netflix |
| Piedmont Lithium |
Netflix and Piedmont Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Piedmont Lithium
The main advantage of trading using opposite Netflix and Piedmont Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Piedmont Lithium 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 Piedmont Lithium will offset losses from the drop in Piedmont Lithium's long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| Piedmont Lithium vs. Sassy Resources | Piedmont Lithium vs. Aldebaran Resources | Piedmont Lithium vs. Search Minerals | Piedmont Lithium vs. Tamino Minerals |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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