Correlation Between Spotify Technology and Avery Dennison
Can any of the company-specific risk be diversified away by investing in both Spotify Technology and Avery Dennison 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 Avery Dennison 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 Avery Dennison, you can compare the effects of market volatilities on Spotify Technology and Avery Dennison 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 Avery Dennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and Avery Dennison.
Diversification Opportunities for Spotify Technology and Avery Dennison
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Spotify and Avery is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Avery Dennison in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avery Dennison 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 Avery Dennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avery Dennison has no effect on the direction of Spotify Technology i.e., Spotify Technology and Avery Dennison go up and down completely randomly.
Pair Corralation between Spotify Technology and Avery Dennison
Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 2.84 times more return on investment than Avery Dennison. However, Spotify Technology is 2.84 times more volatile than Avery Dennison. It trades about 0.15 of its potential returns per unit of risk. Avery Dennison is currently generating about 0.04 per unit of risk. If you would invest 13,017 in Spotify Technology SA on October 14, 2024 and sell it today you would earn a total of 57,640 from holding Spotify Technology SA or generate 442.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Spotify Technology SA vs. Avery Dennison
Performance |
| Timeline |
| Spotify Technology |
| Avery Dennison |
Spotify Technology and Avery Dennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spotify Technology and Avery Dennison
The main advantage of trading using opposite Spotify Technology and Avery Dennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, Avery Dennison 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 Avery Dennison will offset losses from the drop in Avery Dennison's long position.| Spotify Technology vs. Bank of America | Spotify Technology vs. Jefferies Financial Group | Spotify Technology vs. Ameriprise Financial | Spotify Technology vs. Deutsche Bank Aktiengesellschaft |
| Avery Dennison vs. Spotify Technology SA | Avery Dennison vs. Take Two Interactive Software | Avery Dennison vs. Microchip Technology Incorporated | Avery Dennison vs. Verizon Communications |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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