Correlation Between Netflix and Accenture Plc

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

Diversification Opportunities for Netflix and Accenture Plc

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Netflix and Accenture is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Accenture Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accenture Plc 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 Accenture Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accenture Plc has no effect on the direction of Netflix i.e., Netflix and Accenture Plc go up and down completely randomly.

Pair Corralation between Netflix and Accenture Plc

Given the investment horizon of 90 days Netflix is expected to under-perform the Accenture Plc. In addition to that, Netflix is 2.0 times more volatile than Accenture Plc. It trades about -0.01 of its total potential returns per unit of risk. Accenture Plc is currently generating about 0.04 per unit of volatility. If you would invest  23,753  in Accenture Plc on September 4, 2022 and sell it today you would earn a total of  6,260  from holding Accenture Plc or generate 26.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Netflix  vs.  Accenture Plc

 Performance (%) 
       Timeline  
Netflix 
Netflix Performance
13 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Netflix Price Channel

Accenture Plc 
Accenture Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Accenture Plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Accenture Plc may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Accenture Price Channel

Netflix and Accenture Plc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Netflix and Accenture Plc

The main advantage of trading using opposite Netflix and Accenture Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Accenture Plc 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 Accenture Plc will offset losses from the drop in Accenture Plc's long position.
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The idea behind Netflix and Accenture Plc 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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