Correlation Between Nu Skin and Netflix

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

Diversification Opportunities for Nu Skin and Netflix

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Nu Skin and Netflix is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Nu Skin Enterprises and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix and Nu Skin 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 Nu Skin Enterprises 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 Nu Skin i.e., Nu Skin and Netflix go up and down completely randomly.

Pair Corralation between Nu Skin and Netflix

Considering the 90-day investment horizon Nu Skin is expected to generate 2.62 times less return on investment than Netflix. But when comparing it to its historical volatility, Nu Skin Enterprises is 1.57 times less risky than Netflix. It trades about 0.27 of its potential returns per unit of risk. Netflix is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  19,092  in Netflix on May 17, 2022 and sell it today you would earn a total of  5,838  from holding Netflix or generate 30.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Nu Skin Enterprises  vs.  Netflix

 Performance (%) 
       Timeline  
Nu Skin Enterprises 
Nu Skin Performance
0 of 100
Over the last 90 days Nu Skin Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Nu Skin is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Nu Skin 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 conflicting essential indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Netflix Price Channel

Nu Skin and Netflix Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nu Skin and Netflix

The main advantage of trading using opposite Nu Skin and Netflix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nu Skin 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 Nu Skin Enterprises 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 Price Transformation module to use Price Transformation models to analyze depth of different equity instruments across global markets.

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