Correlation Between New Gold and Netflix
Can any of the company-specific risk be diversified away by investing in both New Gold and Netflix 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 New Gold and Netflix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Gold and Netflix, you can compare the effects of market volatilities on New Gold and Netflix 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 New Gold with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Gold and Netflix.
Diversification Opportunities for New Gold and Netflix
Significant diversification
The 3 months correlation between New and Netflix is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding New Gold and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and New Gold 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 New Gold are associated (or correlated) with Netflix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netflix has no effect on the direction of New Gold i.e., New Gold and Netflix go up and down completely randomly.
Pair Corralation between New Gold and Netflix
Considering the 90-day investment horizon New Gold is expected to generate 1.85 times more return on investment than Netflix. However, New Gold is 1.85 times more volatile than Netflix. It trades about 0.1 of its potential returns per unit of risk. Netflix is currently generating about 0.15 per unit of risk. If you would invest 146.00 in New Gold on August 25, 2024 and sell it today you would earn a total of 137.00 from holding New Gold or generate 93.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Gold vs. Netflix
Performance |
| Timeline |
| New Gold |
| Netflix |
New Gold and Netflix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Gold and Netflix
The main advantage of trading using opposite New Gold and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Gold position performs unexpectedly, Netflix 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 Netflix will offset losses from the drop in Netflix's long position.The idea behind New Gold and Netflix 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.| 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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