Correlation Between Netflix and Charter Communications
Can any of the company-specific risk be diversified away by investing in both Netflix and Charter Communications 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 Charter Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and Charter Communications, you can compare the effects of market volatilities on Netflix and Charter Communications 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 Charter Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and Charter Communications.
Diversification Opportunities for Netflix and Charter Communications
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Netflix and Charter is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications 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 Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of Netflix i.e., Netflix and Charter Communications go up and down completely randomly.
Pair Corralation between Netflix and Charter Communications
Given the investment horizon of 90 days Netflix is expected to generate 1.1 times more return on investment than Charter Communications. However, Netflix is 1.1 times more volatile than Charter Communications. It trades about -0.08 of its potential returns per unit of risk. Charter Communications is currently generating about -0.41 per unit of risk. If you would invest 62,769 in Netflix on January 20, 2024 and sell it today you would lose (1,713) from holding Netflix or give up 2.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. Charter Communications
Performance |
| Timeline |
| Netflix |
| Charter Communications |
Netflix and Charter Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and Charter Communications
The main advantage of trading using opposite Netflix and Charter Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Charter Communications 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 Charter Communications will offset losses from the drop in Charter Communications' long position.The idea behind Netflix and Charter Communications 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.| Charter Communications vs. Liberty Global PLC | Charter Communications vs. Shenandoah Telecommunications Co | Charter Communications vs. Liberty Global PLC | Charter Communications vs. Liberty Latin America |
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 CEOs Directory module to screen CEOs from public companies around the world.
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