Correlation Between Spotify Technology and Macys

Can any of the company-specific risk be diversified away by investing in both Spotify Technology and Macys 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 Macys 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 Macys Inc, you can compare the effects of market volatilities on Spotify Technology and Macys 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 Macys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and Macys.

Diversification Opportunities for Spotify Technology and Macys

0.82

Correlation Coefficient

Spotify Technology  Macys

Very poor diversification

The 3 months correlation between Spotify and Macys is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc 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 Macys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macys Inc has no effect on the direction of Spotify Technology i.e., Spotify Technology and Macys go up and down completely randomly.

Pair Corralation between Spotify Technology and Macys

Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 1.15 times more return on investment than Macys. However, Spotify Technology is 1.15 times more volatile than Macys Inc. It trades about 0.23 of its potential returns per unit of risk. Macys Inc is currently generating about 0.18 per unit of risk. If you would invest  50,508  in Spotify Technology SA on September 27, 2024 and sell it today you would earn a total of  20,402  from holding Spotify Technology SA or generate 40.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Spotify Technology SA  vs.  Macys Inc

Spotify Technology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Spotify Technology SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Spotify Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Macys Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Macys sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spotify Technology and Macys

The main advantage of trading using opposite Spotify Technology and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, Macys 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 Macys will offset losses from the drop in Macys' long position.

The idea behind Spotify Technology SA and Macys Inc 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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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.