Correlation Between Netflix and Penn National

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

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

Diversification Opportunities for Netflix and Penn National

-0.74

Correlation Coefficient

Netflix  Penn National

Pay attention - limited upside

The 3 months correlation between Netflix and Penn is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming 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 Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Netflix i.e., Netflix and Penn National go up and down completely randomly.

Pair Corralation between Netflix and Penn National

Given the investment horizon of 90 days Netflix is expected to generate 0.88 times more return on investment than Penn National. However, Netflix is 1.14 times less risky than Penn National. It trades about 0.1 of its potential returns per unit of risk. Penn National Gaming is currently generating about -0.03 per unit of risk. If you would invest  18,588  in Netflix on January 25, 2024 and sell it today you would earn a total of  36,924  from holding Netflix or generate 198.64% return on investment over 90 days.

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

Netflix  vs.  Penn National Gaming

Netflix

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Netflix is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Penn National Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Netflix and Penn National

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

The idea behind Netflix and Penn National Gaming 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.