Correlation Between Baker Steel and Spotify Technology
Can any of the company-specific risk be diversified away by investing in both Baker Steel 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 Baker Steel and Spotify Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baker Steel Resources and Spotify Technology SA, you can compare the effects of market volatilities on Baker Steel 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 Baker Steel with a short position of Spotify Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Steel and Spotify Technology.
Diversification Opportunities for Baker Steel and Spotify Technology
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Baker and Spotify is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology and Baker Steel 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 Baker Steel Resources 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 Baker Steel i.e., Baker Steel and Spotify Technology go up and down completely randomly.
Pair Corralation between Baker Steel and Spotify Technology
Assuming the 90 days trading horizon Baker Steel Resources is expected to under-perform the Spotify Technology. But the stock apears to be less risky and, when comparing its historical volatility, Baker Steel Resources is 1.91 times less risky than Spotify Technology. The stock trades about -0.29 of its potential returns per unit of risk. The Spotify Technology SA is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 48,595 in Spotify Technology SA on November 28, 2024 and sell it today you would earn a total of 6,825 from holding Spotify Technology SA or generate 14.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baker Steel Resources vs. Spotify Technology SA
Performance |
| Timeline |
| Baker Steel Resources |
| Spotify Technology |
Baker Steel and Spotify Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Steel and Spotify Technology
The main advantage of trading using opposite Baker Steel and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Steel 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.| Baker Steel vs. United States Steel | Baker Steel vs. Ondine Biomedical | Baker Steel vs. Naturhouse Health SA | Baker Steel vs. Creo Medical Group |
| Spotify Technology vs. Home Depot | Spotify Technology vs. Weiss Korea Opportunity | Spotify Technology vs. River and Mercantile | Spotify Technology vs. Chrysalis Investments |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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