Correlation Between Avery Dennison and Netflix

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Can any of the company-specific risk be diversified away by investing in both Avery Dennison 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 Avery Dennison and Netflix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avery Dennison Corp and Netflix, you can compare the effects of market volatilities on Avery Dennison 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 Avery Dennison with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avery Dennison and Netflix.

Diversification Opportunities for Avery Dennison and Netflix

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Avery and Netflix is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Avery Dennison Corp and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Avery Dennison 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 Avery Dennison Corp 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 Avery Dennison i.e., Avery Dennison and Netflix go up and down completely randomly.

Pair Corralation between Avery Dennison and Netflix

Considering the 90-day investment horizon Avery Dennison Corp is expected to generate 0.59 times more return on investment than Netflix. However, Avery Dennison Corp is 1.69 times less risky than Netflix. It trades about 0.25 of its potential returns per unit of risk. Netflix is currently generating about 0.04 per unit of risk. If you would invest  21,330  in Avery Dennison Corp on December 29, 2023 and sell it today you would earn a total of  995.00  from holding Avery Dennison Corp or generate 4.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Avery Dennison Corp  vs.  Netflix

 Performance 
       Timeline  
Avery Dennison Corp 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Avery Dennison Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Avery Dennison may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Netflix 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 14 (%) 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.

Avery Dennison and Netflix Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Avery Dennison and Netflix

The main advantage of trading using opposite Avery Dennison and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avery Dennison 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 Avery Dennison Corp 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.
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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