Correlation Between Seven Arts and Netflix

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

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

Diversification Opportunities for Seven Arts and Netflix

-0.35

Correlation Coefficient

Seven Arts  Netflix

Very good diversification

The 3 months correlation between Seven and Netflix is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Seven Arts Entertainment and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Seven Arts 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 Seven Arts Entertainment 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 Seven Arts i.e., Seven Arts and Netflix go up and down completely randomly.

Pair Corralation between Seven Arts and Netflix

Given the investment horizon of 90 days Seven Arts Entertainment is expected to generate 7.33 times more return on investment than Netflix. However, Seven Arts is 7.33 times more volatile than Netflix. It trades about 0.05 of its potential returns per unit of risk. Netflix is currently generating about 0.11 per unit of risk. If you would invest  0.14  in Seven Arts Entertainment on September 27, 2024 and sell it today you would lose (0.11) from holding Seven Arts Entertainment or give up 78.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Seven Arts Entertainment  vs.  Netflix

Seven Arts Entertainment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Seven Arts Entertainment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Seven Arts showed solid returns over the last few months and may actually be approaching a breakup point.

Netflix

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seven Arts and Netflix

The main advantage of trading using opposite Seven Arts and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seven Arts 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 Seven Arts Entertainment 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.