Correlation Between Spotify Technology and Telefonaktiebolaget
Can any of the company-specific risk be diversified away by investing in both Spotify Technology and Telefonaktiebolaget 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 Spotify Technology and Telefonaktiebolaget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spotify Technology SA and Telefonaktiebolaget LM Ericsson, you can compare the effects of market volatilities on Spotify Technology and Telefonaktiebolaget 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 Spotify Technology with a short position of Telefonaktiebolaget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and Telefonaktiebolaget.
Diversification Opportunities for Spotify Technology and Telefonaktiebolaget
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Spotify and Telefonaktiebolaget is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and Spotify Technology 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 Spotify Technology SA are associated (or correlated) with Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of Spotify Technology i.e., Spotify Technology and Telefonaktiebolaget go up and down completely randomly.
Pair Corralation between Spotify Technology and Telefonaktiebolaget
Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 1.27 times more return on investment than Telefonaktiebolaget. However, Spotify Technology is 1.27 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about 0.19 of its potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.12 per unit of risk. If you would invest 23,046 in Spotify Technology SA on September 25, 2024 and sell it today you would earn a total of 47,864 from holding Spotify Technology SA or generate 207.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 92.4% |
Values | Daily Returns |
Spotify Technology SA vs. Telefonaktiebolaget LM Ericsso
Performance |
Timeline |
Spotify Technology |
Telefonaktiebolaget |
Spotify Technology and Telefonaktiebolaget Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Spotify Technology and Telefonaktiebolaget
The main advantage of trading using opposite Spotify Technology and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, Telefonaktiebolaget 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 Telefonaktiebolaget will offset losses from the drop in Telefonaktiebolaget's long position.Spotify Technology vs. Bread Financial Holdings | Spotify Technology vs. Taiwan Semiconductor Manufacturing | Spotify Technology vs. Take Two Interactive Software | Spotify Technology vs. Paycom Software |
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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 the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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