Correlation Between Netflix and Visteon Corp

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

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

Diversification Opportunities for Netflix and Visteon Corp

-0.71

Correlation Coefficient

Netflix  Visteon Corp

Pay attention - limited upside

The 3 months correlation between Netflix and Visteon is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Visteon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visteon Corp 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 Visteon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visteon Corp has no effect on the direction of Netflix i.e., Netflix and Visteon Corp go up and down completely randomly.

Pair Corralation between Netflix and Visteon Corp

Given the investment horizon of 90 days Netflix is expected to generate 0.77 times more return on investment than Visteon Corp. However, Netflix is 1.3 times less risky than Visteon Corp. It trades about -0.01 of its potential returns per unit of risk. Visteon Corp is currently generating about -0.05 per unit of risk. If you would invest  69,047  in Netflix on July 20, 2024 and sell it today you would lose (282.00) from holding Netflix or give up 0.41% of portfolio value over 90 days.

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

Netflix  vs.  Visteon Corp

Netflix

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 5 (%) 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 November 2024.

Visteon Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Visteon Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in November 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Netflix and Visteon Corp

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

The idea behind Netflix and Visteon Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.