Correlation Between Air Products and Spotify Technology
Can any of the company-specific risk be diversified away by investing in both Air Products and Spotify Technology 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 Air Products and Spotify Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products Chemicals and Spotify Technology SA, you can compare the effects of market volatilities on Air Products and Spotify Technology 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 Air Products with a short position of Spotify Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Spotify Technology.
Diversification Opportunities for Air Products and Spotify Technology
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Spotify is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Air Products Chemicals and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology and Air Products 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 Air Products Chemicals are associated (or correlated) with Spotify Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spotify Technology has no effect on the direction of Air Products i.e., Air Products and Spotify Technology go up and down completely randomly.
Pair Corralation between Air Products and Spotify Technology
Assuming the 90 days trading horizon Air Products is expected to generate 1.7 times less return on investment than Spotify Technology. In addition to that, Air Products is 2.29 times more volatile than Spotify Technology SA. It trades about 0.03 of its total potential returns per unit of risk. Spotify Technology SA is currently generating about 0.13 per unit of volatility. If you would invest 13,878 in Spotify Technology SA on September 2, 2024 and sell it today you would earn a total of 31,267 from holding Spotify Technology SA or generate 225.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.43% |
| Values | Daily Returns |
Air Products Chemicals vs. Spotify Technology SA
Performance |
| Timeline |
| Air Products Chemicals |
| Spotify Technology |
Air Products and Spotify Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and Spotify Technology
The main advantage of trading using opposite Air Products and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products position performs unexpectedly, Spotify Technology 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 Spotify Technology will offset losses from the drop in Spotify Technology's long position.| Air Products vs. Uniper SE | Air Products vs. Mulberry Group PLC | Air Products vs. London Security Plc | Air Products vs. Triad Group PLC |
| Spotify Technology vs. Ecclesiastical Insurance Office | Spotify Technology vs. Associated British Foods | Spotify Technology vs. Wyndham Hotels Resorts | Spotify Technology vs. Host Hotels Resorts |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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