Correlation Between Netflix and Disney

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

Diversification Opportunities for Netflix and Disney

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Netflix and Disney is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Netflix and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney 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 Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Netflix i.e., Netflix and Disney go up and down completely randomly.

Pair Corralation between Netflix and Disney

Given the investment horizon of 90 days Netflix is expected to generate 1.73 times more return on investment than Disney. However, Netflix is 1.73 times more volatile than Walt Disney. It trades about -0.02 of its potential returns per unit of risk. Walt Disney is currently generating about -0.06 per unit of risk. If you would invest  51,040  in Netflix on August 31, 2022 and sell it today you would lose (22,923)  from holding Netflix or give up 44.91% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Netflix  vs.  Walt Disney

 Performance (%) 
       Timeline  
Netflix 
Netflix Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Netflix Price Channel

Walt Disney 
Disney Performance
0 of 100
Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in December 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Disney Price Channel

Netflix and Disney Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Netflix and Disney

The main advantage of trading using opposite Netflix and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netflix position performs unexpectedly, Disney 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 Disney will offset losses from the drop in Disney's long position.
Netflix vs. Activision Blizzard
Netflix vs. Boyd Gaming Corp
Netflix vs. Comcast Corp A
Netflix vs. Caesars Entertainment
The idea behind Netflix and Walt Disney 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.
Disney vs. Activision Blizzard
Disney vs. Boyd Gaming Corp
Disney vs. Comcast Corp A
Disney vs. Caesars Entertainment
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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