Correlation Between Spotify Technology and CVS Health
Can any of the company-specific risk be diversified away by investing in both Spotify Technology and CVS Health 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 CVS Health 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 CVS Health Corp, you can compare the effects of market volatilities on Spotify Technology and CVS Health 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and CVS Health.
Diversification Opportunities for Spotify Technology and CVS Health
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Spotify and CVS is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of Spotify Technology i.e., Spotify Technology and CVS Health go up and down completely randomly.
Pair Corralation between Spotify Technology and CVS Health
Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 1.08 times more return on investment than CVS Health. However, Spotify Technology is 1.08 times more volatile than CVS Health Corp. It trades about 0.16 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.04 per unit of risk. If you would invest 22,000 in Spotify Technology SA on November 8, 2024 and sell it today you would earn a total of 38,130 from holding Spotify Technology SA or generate 173.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.06% |
| Values | Daily Returns |
Spotify Technology SA vs. CVS Health Corp
Performance |
| Timeline |
| Spotify Technology |
| CVS Health Corp |
Spotify Technology and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spotify Technology and CVS Health
The main advantage of trading using opposite Spotify Technology and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| Spotify Technology vs. Cairo Communication SpA | Spotify Technology vs. Chrysalis Investments | Spotify Technology vs. Spirent Communications plc | Spotify Technology vs. EJF Investments |
| CVS Health vs. Nordea Bank Abp | CVS Health vs. Tatton Asset Management | CVS Health vs. Liontrust Asset Management | CVS Health vs. Deutsche Pfandbriefbank AG |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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