Correlation Between Natura Co and Spotify Technology
Can any of the company-specific risk be diversified away by investing in both Natura Co 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 Natura Co and Spotify Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Natura Co Holding and Spotify Technology SA, you can compare the effects of market volatilities on Natura Co 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 Natura Co with a short position of Spotify Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natura Co and Spotify Technology.
Diversification Opportunities for Natura Co and Spotify Technology
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Natura and Spotify is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Natura Co Holding and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology and Natura Co 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 Natura Co Holding 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 Natura Co i.e., Natura Co and Spotify Technology go up and down completely randomly.
Pair Corralation between Natura Co and Spotify Technology
Assuming the 90 days trading horizon Natura Co Holding is expected to under-perform the Spotify Technology. But the stock apears to be less risky and, when comparing its historical volatility, Natura Co Holding is 1.16 times less risky than Spotify Technology. The stock trades about -0.06 of its potential returns per unit of risk. The Spotify Technology SA is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest 54,600 in Spotify Technology SA on September 4, 2024 and sell it today you would earn a total of 17,832 from holding Spotify Technology SA or generate 32.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Natura Co Holding vs. Spotify Technology SA
Performance |
| Timeline |
| Natura Co Holding |
| Spotify Technology |
Natura Co and Spotify Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natura Co and Spotify Technology
The main advantage of trading using opposite Natura Co and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natura Co 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.| Natura Co vs. Spotify Technology SA | Natura Co vs. NXP Semiconductors NV | Natura Co vs. Take Two Interactive Software | Natura Co vs. Cognizant Technology Solutions |
| Spotify Technology vs. Apartment Investment and | Spotify Technology vs. G2D Investments | Spotify Technology vs. Uber Technologies | Spotify Technology vs. Bio Techne |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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