Correlation Between Netflix and Sinclair Broadcast

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

By analyzing existing cross correlation between Netflix and Sinclair Broadcast Group, you can compare the effects of market volatilities on Netflix and Sinclair Broadcast 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 Sinclair Broadcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Sinclair Broadcast.

Diversification Opportunities for Netflix and Sinclair Broadcast

-0.44

Correlation Coefficient

Netflix  Sinclair Broadcast

Very good diversification

The 3 months correlation between Netflix and Sinclair is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Sinclair Broadcast Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinclair Broadcast 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 Sinclair Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinclair Broadcast has no effect on the direction of Netflix i.e., Netflix and Sinclair Broadcast go up and down completely randomly.

Pair Corralation between Netflix and Sinclair Broadcast

Given the investment horizon of 90 days Netflix is expected to generate 0.49 times more return on investment than Sinclair Broadcast. However, Netflix is 2.05 times less risky than Sinclair Broadcast. It trades about 0.13 of its potential returns per unit of risk. Sinclair Broadcast Group is currently generating about 0.03 per unit of risk. If you would invest  43,665  in Netflix on February 6, 2024 and sell it today you would earn a total of  15,724  from holding Netflix or generate 36.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Netflix  vs.  Sinclair Broadcast Group

Netflix

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Netflix may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Sinclair Broadcast

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinclair Broadcast Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Sinclair Broadcast is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Netflix and Sinclair Broadcast

The main advantage of trading using opposite Netflix and Sinclair Broadcast positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Sinclair Broadcast 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 Sinclair Broadcast will offset losses from the drop in Sinclair Broadcast's long position.

The idea behind Netflix and Sinclair Broadcast Group 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.