Correlation Between Netflix and Roku
Can any of the company-specific risk be diversified away by investing in both Netflix and Roku 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 Roku into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Roku Inc, you can compare the effects of market volatilities on Netflix and Roku 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 Roku. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Roku.
Diversification Opportunities for Netflix and Roku
Average diversification
The 3 months correlation between Netflix and Roku is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Roku Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roku Inc 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 Roku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roku Inc has no effect on the direction of Netflix i.e., Netflix and Roku go up and down completely randomly.
Pair Corralation between Netflix and Roku
Given the investment horizon of 90 days Netflix is expected to generate 0.55 times more return on investment than Roku. However, Netflix is 1.83 times less risky than Roku. It trades about 0.11 of its potential returns per unit of risk. Roku Inc is currently generating about 0.03 per unit of risk. If you would invest 30,556 in Netflix on August 27, 2024 and sell it today you would earn a total of 59,223 from holding Netflix or generate 193.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. Roku Inc
Performance |
| Timeline |
| Netflix |
| Roku Inc |
Netflix and Roku Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Roku
The main advantage of trading using opposite Netflix and Roku positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Roku 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 Roku will offset losses from the drop in Roku's long position.| Netflix vs. Paramount Global Class | Netflix vs. Roku Inc | Netflix vs. Warner Bros Discovery | Netflix vs. AMC Entertainment Holdings |
| Roku vs. ADTRAN Inc | Roku vs. Belden Inc | Roku vs. ADC Therapeutics SA | Roku vs. Comtech Telecommunications Corp |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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