Correlation Between Netflix and Alibaba Health
Can any of the company-specific risk be diversified away by investing in both Netflix and Alibaba Health 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 Alibaba Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Alibaba Health Information, you can compare the effects of market volatilities on Netflix and Alibaba Health 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 Alibaba Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Alibaba Health.
Diversification Opportunities for Netflix and Alibaba Health
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Netflix and Alibaba is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Alibaba Health Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Health Infor 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 Alibaba Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Health Infor has no effect on the direction of Netflix i.e., Netflix and Alibaba Health go up and down completely randomly.
Pair Corralation between Netflix and Alibaba Health
Given the investment horizon of 90 days Netflix is expected to generate 0.44 times more return on investment than Alibaba Health. However, Netflix is 2.26 times less risky than Alibaba Health. It trades about 0.61 of its potential returns per unit of risk. Alibaba Health Information is currently generating about -0.05 per unit of risk. If you would invest 75,551 in Netflix on September 5, 2024 and sell it today you would earn a total of 15,555 from holding Netflix or generate 20.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. Alibaba Health Information
Performance |
| Timeline |
| Netflix |
| Alibaba Health Infor |
Netflix and Alibaba Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Alibaba Health
The main advantage of trading using opposite Netflix and Alibaba Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Alibaba Health 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 Alibaba Health will offset losses from the drop in Alibaba Health'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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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