Correlation Between Spotify Technology and Bread Financial
Can any of the company-specific risk be diversified away by investing in both Spotify Technology and Bread Financial 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 Bread Financial 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 Bread Financial Holdings, you can compare the effects of market volatilities on Spotify Technology and Bread Financial 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 Bread Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and Bread Financial.
Diversification Opportunities for Spotify Technology and Bread Financial
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Spotify and Bread is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Bread Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bread Financial Holdings 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 Bread Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bread Financial Holdings has no effect on the direction of Spotify Technology i.e., Spotify Technology and Bread Financial go up and down completely randomly.
Pair Corralation between Spotify Technology and Bread Financial
Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 0.69 times more return on investment than Bread Financial. However, Spotify Technology SA is 1.45 times less risky than Bread Financial. It trades about 0.34 of its potential returns per unit of risk. Bread Financial Holdings is currently generating about 0.2 per unit of risk. 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 Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Spotify Technology SA vs. Bread Financial Holdings
Performance |
| Timeline |
| Spotify Technology |
| Bread Financial Holdings |
Spotify Technology and Bread Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spotify Technology and Bread Financial
The main advantage of trading using opposite Spotify Technology and Bread Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, Bread Financial 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 Bread Financial will offset losses from the drop in Bread Financial's long position.| Spotify Technology vs. Capital One Financial | Spotify Technology vs. Sumitomo Mitsui Financial | Spotify Technology vs. GP Investments | Spotify Technology vs. Metalurgica Gerdau SA |
| Bread Financial vs. Sumitomo Mitsui Financial | Bread Financial vs. STMicroelectronics NV | Bread Financial vs. Electronic Arts | Bread Financial vs. Credit Acceptance |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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