Correlation Between Spotify Technology and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Spotify Technology and Auto Trader 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 Auto Trader 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 Auto Trader Group, you can compare the effects of market volatilities on Spotify Technology and Auto Trader 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 Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and Auto Trader.
Diversification Opportunities for Spotify Technology and Auto Trader
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Spotify and Auto is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group 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 Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Spotify Technology i.e., Spotify Technology and Auto Trader go up and down completely randomly.
Pair Corralation between Spotify Technology and Auto Trader
Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 1.72 times more return on investment than Auto Trader. However, Spotify Technology is 1.72 times more volatile than Auto Trader Group. It trades about 0.13 of its potential returns per unit of risk. Auto Trader Group is currently generating about 0.07 per unit of risk. If you would invest 14,000 in Spotify Technology SA on August 31, 2024 and sell it today you would earn a total of 31,145 from holding Spotify Technology SA or generate 222.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.95% |
| Values | Daily Returns |
Spotify Technology SA vs. Auto Trader Group
Performance |
| Timeline |
| Spotify Technology |
| Auto Trader Group |
Spotify Technology and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spotify Technology and Auto Trader
The main advantage of trading using opposite Spotify Technology and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Spotify Technology vs. Neometals | Spotify Technology vs. Coor Service Management | Spotify Technology vs. Aeorema Communications Plc | Spotify Technology vs. JLEN Environmental Assets |
| Auto Trader vs. Infrastrutture Wireless Italiane | Auto Trader vs. European Metals Holdings | Auto Trader vs. Gamma Communications PLC | Auto Trader vs. Empire Metals Limited |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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