Correlation Between Baxter International and Spotify Technology
Can any of the company-specific risk be diversified away by investing in both Baxter International 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 Baxter International and Spotify Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baxter International and Spotify Technology SA, you can compare the effects of market volatilities on Baxter International 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 Baxter International with a short position of Spotify Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baxter International and Spotify Technology.
Diversification Opportunities for Baxter International and Spotify Technology
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Baxter and Spotify is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Baxter International and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology and Baxter International 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 Baxter International 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 Baxter International i.e., Baxter International and Spotify Technology go up and down completely randomly.
Pair Corralation between Baxter International and Spotify Technology
Assuming the 90 days trading horizon Baxter International is expected to under-perform the Spotify Technology. But the stock apears to be less risky and, when comparing its historical volatility, Baxter International is 1.74 times less risky than Spotify Technology. The stock trades about -0.17 of its potential returns per unit of risk. The Spotify Technology SA is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 56,304 in Spotify Technology SA on August 30, 2024 and sell it today you would earn a total of 14,040 from holding Spotify Technology SA or generate 24.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Baxter International vs. Spotify Technology SA
Performance |
| Timeline |
| Baxter International |
| Spotify Technology |
Baxter International and Spotify Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baxter International and Spotify Technology
The main advantage of trading using opposite Baxter International and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baxter International 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.| Baxter International vs. Fleury SA | Baxter International vs. Baumer SA | Baxter International vs. Energisa SA | Baxter International vs. BTG Pactual Logstica |
| Spotify Technology vs. Capital One Financial | Spotify Technology vs. Sumitomo Mitsui Financial | Spotify Technology vs. GP Investments | Spotify Technology vs. Metalurgica Gerdau SA |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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