Correlation Between Netflix and Madison Square

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

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

Diversification Opportunities for Netflix and Madison Square

-0.51

Correlation Coefficient

Netflix  Madison Square

Excellent diversification

The 3 months correlation between Netflix and Madison is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Madison Square Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Square Garden 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 Madison Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Square Garden has no effect on the direction of Netflix i.e., Netflix and Madison Square go up and down completely randomly.

Pair Corralation between Netflix and Madison Square

Given the investment horizon of 90 days Netflix is expected to generate 1.79 times more return on investment than Madison Square. However, Netflix is 1.79 times more volatile than Madison Square Garden. It trades about 0.1 of its potential returns per unit of risk. Madison Square Garden is currently generating about 0.04 per unit of risk. If you would invest  17,310  in Netflix on January 29, 2024 and sell it today you would earn a total of  38,813  from holding Netflix or generate 224.22% return on investment over 90 days.

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

Netflix  vs.  Madison Square Garden

Netflix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Netflix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Netflix is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Madison Square Garden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Madison Square Garden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Madison Square is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Netflix and Madison Square

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

The idea behind Netflix and Madison Square Garden 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.