Correlation Between Netflix and Grupo Televisa

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

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

Diversification Opportunities for Netflix and Grupo Televisa

0.48

Correlation Coefficient

Netflix  Grupo Televisa

Very weak diversification

The 3 months correlation between Netflix and Grupo is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Grupo Televisa SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Televisa SAB 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 Grupo Televisa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Televisa SAB has no effect on the direction of Netflix i.e., Netflix and Grupo Televisa go up and down completely randomly.

Pair Corralation between Netflix and Grupo Televisa

Given the investment horizon of 90 days Netflix is expected to under-perform the Grupo Televisa. But the stock apears to be less risky and, when comparing its historical volatility, Netflix is 1.18 times less risky than Grupo Televisa. The stock trades about -0.12 of its potential returns per unit of risk. The Grupo Televisa SAB is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  335.00  in Grupo Televisa SAB on February 7, 2024 and sell it today you would lose (9.00) from holding Grupo Televisa SAB or give up 2.69% of portfolio value over 90 days.

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

Netflix  vs.  Grupo Televisa SAB

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.

Grupo Televisa SAB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Televisa SAB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Grupo Televisa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netflix and Grupo Televisa

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

The idea behind Netflix and Grupo Televisa SAB 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..