Correlation Between Nike and Netflix

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Nike 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 Nike and Netflix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Netflix, you can compare the effects of market volatilities on Nike 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 Nike with a short position of Netflix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Netflix.

Diversification Opportunities for Nike and Netflix

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Nike and Netflix is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Nike 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 Nike Inc 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 Nike i.e., Nike and Netflix go up and down completely randomly.

Pair Corralation between Nike and Netflix

Considering the 90-day investment horizon Nike is expected to generate 2.55 times less return on investment than Netflix. But when comparing it to its historical volatility, Nike Inc is 1.42 times less risky than Netflix. It trades about 0.17 of its potential returns per unit of risk. Netflix is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  20,163  in Netflix on May 20, 2022 and sell it today you would earn a total of  3,952  from holding Netflix or generate 19.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Nike Inc  vs.  Netflix

 Performance (%) 
       Timeline  
Nike Inc 
Nike Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Nike Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward-looking signals, Nike may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Nike Price Channel

Netflix 
Netflix Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Netflix Price Channel

Nike and Netflix Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nike and Netflix

The main advantage of trading using opposite Nike and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike 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 Nike Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

Other Complementary Tools

Fund Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Go
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Go
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Go
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
ETF Directory
Find actively traded Exchange Traded Funds (ETF) from around the world
Go