Correlation Between Netflix and DXP Enterprises
Can any of the company-specific risk be diversified away by investing in both Netflix and DXP Enterprises 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 DXP Enterprises into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Netflix and DXP Enterprises, you can compare the effects of market volatilities on Netflix and DXP Enterprises 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 DXP Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netflix and DXP Enterprises.
Diversification Opportunities for Netflix and DXP Enterprises
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Netflix and DXP is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and DXP Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXP Enterprises 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 DXP Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXP Enterprises has no effect on the direction of Netflix i.e., Netflix and DXP Enterprises go up and down completely randomly.
Pair Corralation between Netflix and DXP Enterprises
Given the investment horizon of 90 days Netflix is expected to under-perform the DXP Enterprises. In addition to that, Netflix is 1.53 times more volatile than DXP Enterprises. It trades about -0.2 of its total potential returns per unit of risk. DXP Enterprises is currently generating about 0.02 per unit of volatility. If you would invest 5,173 in DXP Enterprises on January 26, 2024 and sell it today you would earn a total of 18.00 from holding DXP Enterprises or generate 0.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Netflix vs. DXP Enterprises
Performance |
| Timeline |
| Netflix |
| DXP Enterprises |
Netflix and DXP Enterprises Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Netflix and DXP Enterprises
The main advantage of trading using opposite Netflix and DXP Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, DXP Enterprises 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 DXP Enterprises will offset losses from the drop in DXP Enterprises' long position.| Netflix vs. Roku Inc | Netflix vs. Paramount Global Class | Netflix vs. Warner Bros Discovery | Netflix vs. Paramount Global Class |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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