Correlation Between Spotify Technology and Norwegian Air
Can any of the company-specific risk be diversified away by investing in both Spotify Technology and Norwegian Air 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 Norwegian Air 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 Norwegian Air Shuttle, you can compare the effects of market volatilities on Spotify Technology and Norwegian Air 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 Norwegian Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and Norwegian Air.
Diversification Opportunities for Spotify Technology and Norwegian Air
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Spotify and Norwegian is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Norwegian Air Shuttle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norwegian Air Shuttle 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 Norwegian Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norwegian Air Shuttle has no effect on the direction of Spotify Technology i.e., Spotify Technology and Norwegian Air go up and down completely randomly.
Pair Corralation between Spotify Technology and Norwegian Air
Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 0.66 times more return on investment than Norwegian Air. However, Spotify Technology SA is 1.51 times less risky than Norwegian Air. It trades about 0.3 of its potential returns per unit of risk. Norwegian Air Shuttle is currently generating about -0.05 per unit of risk. If you would invest 33,855 in Spotify Technology SA on September 3, 2024 and sell it today you would earn a total of 11,290 from holding Spotify Technology SA or generate 33.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spotify Technology SA vs. Norwegian Air Shuttle
Performance |
| Timeline |
| Spotify Technology |
| Norwegian Air Shuttle |
Spotify Technology and Norwegian Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spotify Technology and Norwegian Air
The main advantage of trading using opposite Spotify Technology and Norwegian Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, Norwegian Air 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 Norwegian Air will offset losses from the drop in Norwegian Air's long position.| Spotify Technology vs. Catalyst Media Group | Spotify Technology vs. CATLIN GROUP | Spotify Technology vs. Magnora ASA | Spotify Technology vs. RTW Venture Fund |
| Norwegian Air vs. Catalyst Media Group | Norwegian Air vs. CATLIN GROUP | Norwegian Air vs. Magnora ASA | Norwegian Air vs. RTW Venture Fund |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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