Correlation Between Netflix and REALTY

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Can any of the company-specific risk be diversified away by investing in both Netflix and REALTY 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 REALTY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and REALTY INCOME P, you can compare the effects of market volatilities on Netflix and REALTY 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 REALTY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and REALTY.

Diversification Opportunities for Netflix and REALTY

-0.67
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Netflix and REALTY is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and REALTY INCOME P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REALTY INCOME P 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 REALTY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REALTY INCOME P has no effect on the direction of Netflix i.e., Netflix and REALTY go up and down completely randomly.

Pair Corralation between Netflix and REALTY

Given the investment horizon of 90 days Netflix is expected to generate 1.36 times more return on investment than REALTY. However, Netflix is 1.36 times more volatile than REALTY INCOME P. It trades about 0.46 of its potential returns per unit of risk. REALTY INCOME P is currently generating about -0.07 per unit of risk. If you would invest  74,912  in Netflix on August 27, 2024 and sell it today you would earn a total of  11,647  from holding Netflix or generate 15.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy95.24%
ValuesDaily Returns

Netflix  vs.  REALTY INCOME P

 Performance 
       Timeline  
Netflix 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.
REALTY INCOME P 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days REALTY INCOME P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, REALTY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Netflix and REALTY Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Netflix and REALTY

The main advantage of trading using opposite Netflix and REALTY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, REALTY 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 REALTY will offset losses from the drop in REALTY's long position.
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The idea behind Netflix and REALTY INCOME P pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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