Correlation Between Netflix and AMC Entertainment
Can any of the company-specific risk be diversified away by investing in both Netflix and AMC Entertainment 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 AMC Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and AMC Entertainment Holdings, you can compare the effects of market volatilities on Netflix and AMC Entertainment 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 AMC Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and AMC Entertainment.
Diversification Opportunities for Netflix and AMC Entertainment
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Netflix and AMC is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and AMC Entertainment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMC Entertainment 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 AMC Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMC Entertainment has no effect on the direction of Netflix i.e., Netflix and AMC Entertainment go up and down completely randomly.
Pair Corralation between Netflix and AMC Entertainment
Given the investment horizon of 90 days Netflix is expected to under-perform the AMC Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Netflix is 2.02 times less risky than AMC Entertainment. The stock trades about -0.05 of its potential returns per unit of risk. The AMC Entertainment Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 295.00 in AMC Entertainment Holdings on February 8, 2024 and sell it today you would earn a total of 24.00 from holding AMC Entertainment Holdings or generate 8.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Netflix vs. AMC Entertainment Holdings
Performance |
Timeline |
Netflix |
AMC Entertainment |
Netflix and AMC Entertainment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Netflix and AMC Entertainment
The main advantage of trading using opposite Netflix and AMC Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, AMC Entertainment 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 AMC Entertainment will offset losses from the drop in AMC Entertainment's long position.Netflix vs. Roku Inc | Netflix vs. Paramount Global Class | Netflix vs. Warner Bros Discovery | Netflix vs. Paramount Global Class |
AMC Entertainment vs. Roku Inc | AMC Entertainment vs. Paramount Global Class | AMC Entertainment vs. Warner Bros Discovery | AMC Entertainment vs. Paramount Global Class |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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