Correlation Between News Corp and Netflix

Can any of the company-specific risk be diversified away by investing in both News Corp 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 News Corp and Netflix into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between News Corp B and Netflix, you can compare the effects of market volatilities on News Corp 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 News Corp with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of News Corp and Netflix.

Diversification Opportunities for News Corp and Netflix

0.33

Correlation Coefficient

News Corp  Netflix

Weak diversification

The 3 months correlation between News and Netflix is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding News Corp B and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and News Corp 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 News Corp B 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 News Corp i.e., News Corp and Netflix go up and down completely randomly.

Pair Corralation between News Corp and Netflix

Considering the 90-day investment horizon News Corp B is expected to generate 0.39 times more return on investment than Netflix. However, News Corp B is 2.59 times less risky than Netflix. It trades about -0.25 of its potential returns per unit of risk. Netflix is currently generating about -0.17 per unit of risk. If you would invest  2,633  in News Corp B on February 2, 2024 and sell it today you would lose (160.00) from holding News Corp B or give up 6.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

News Corp B  vs.  Netflix

News Corp B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days News Corp B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, News Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Netflix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Netflix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Netflix is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with News Corp and Netflix

The main advantage of trading using opposite News Corp and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if News Corp 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 News Corp B 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.

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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 Stocks Directory module to find actively traded stocks across global markets.