Correlation Between United States and Netflix
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Netflix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Netflix, you can compare the effects of market volatilities on United States 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 United States with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Netflix.
Diversification Opportunities for United States and Netflix
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Netflix is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and United States 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 United States Steel 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 United States i.e., United States and Netflix go up and down completely randomly.
Pair Corralation between United States and Netflix
Given the investment horizon of 90 days United States is expected to generate 2.94 times less return on investment than Netflix. In addition to that, United States is 1.57 times more volatile than Netflix. It trades about 0.04 of its total potential returns per unit of risk. Netflix is currently generating about 0.16 per unit of volatility. If you would invest 818,200 in Netflix on September 14, 2024 and sell it today you would earn a total of 1,073,323 from holding Netflix or generate 131.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Netflix
Performance |
| Timeline |
| United States Steel |
| Netflix |
United States and Netflix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Netflix
The main advantage of trading using opposite United States and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Steel Dynamics | United States vs. Companhia Siderrgica Nacional | United States vs. The Select Sector | United States vs. Promotora y Operadora |
| Netflix vs. Verizon Communications | Netflix vs. Grupo Sports World | Netflix vs. McEwen Mining | Netflix vs. United States Steel |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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