Correlation Between RegalWorks Media and Netflix

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

By analyzing existing cross correlation between RegalWorks Media and Netflix, you can compare the effects of market volatilities on RegalWorks Media 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 RegalWorks Media with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of RegalWorks Media and Netflix.

Diversification Opportunities for RegalWorks Media and Netflix

-0.46

Correlation Coefficient

RegalWorks Media  Netflix

Very good diversification

The 3 months correlation between RegalWorks and Netflix is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding RegalWorks Media and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and RegalWorks Media 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 RegalWorks Media 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 RegalWorks Media i.e., RegalWorks Media and Netflix go up and down completely randomly.

Pair Corralation between RegalWorks Media and Netflix

Given the investment horizon of 90 days RegalWorks Media is expected to generate 0.55 times more return on investment than Netflix. However, RegalWorks Media is 1.82 times less risky than Netflix. It trades about 0.22 of its potential returns per unit of risk. Netflix is currently generating about -0.22 per unit of risk. If you would invest  3.20  in RegalWorks Media on January 24, 2024 and sell it today you would earn a total of  0.20  from holding RegalWorks Media or generate 6.25% return on investment over 90 days.

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

RegalWorks Media  vs.  Netflix

RegalWorks Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RegalWorks Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Netflix

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 1 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RegalWorks Media and Netflix

The main advantage of trading using opposite RegalWorks Media and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RegalWorks Media 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 RegalWorks Media 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 Stocks Directory module to find actively traded stocks across global markets.