Correlation Between Visa and Netflix
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Netflix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Inc and Netflix, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Netflix.
Diversification Opportunities for Visa and Netflix
Almost no diversification
The 3 months correlation between Visa and Netflix is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Visa 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 Visa Inc 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 Visa i.e., Visa and Netflix go up and down completely randomly.
Pair Corralation between Visa and Netflix
Assuming the 90 days trading horizon Visa is expected to generate 1.72 times less return on investment than Netflix. But when comparing it to its historical volatility, Visa Inc is 1.48 times less risky than Netflix. It trades about 0.12 of its potential returns per unit of risk. Netflix is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 4,108 in Netflix on September 1, 2024 and sell it today you would earn a total of 6,542 from holding Netflix or generate 159.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Visa Inc vs. Netflix
Performance |
| Timeline |
| Visa Inc |
| Netflix |
Visa and Netflix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Netflix
The main advantage of trading using opposite Visa and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. Ameriprise Financial | Visa vs. BIONTECH SE DRN | Visa vs. HDFC Bank Limited | Visa vs. Raytheon Technologies |
| Netflix vs. Tyson Foods | Netflix vs. Monster Beverage | Netflix vs. salesforce inc | Netflix vs. Marfrig Global Foods |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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