Correlation Between Spotify Technology and American Airlines
Can any of the company-specific risk be diversified away by investing in both Spotify Technology and American Airlines 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 American Airlines 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 American Airlines Group, you can compare the effects of market volatilities on Spotify Technology and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and American Airlines.
Diversification Opportunities for Spotify Technology and American Airlines
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Spotify and American is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Spotify Technology i.e., Spotify Technology and American Airlines go up and down completely randomly.
Pair Corralation between Spotify Technology and American Airlines
Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 0.98 times more return on investment than American Airlines. However, Spotify Technology SA is 1.02 times less risky than American Airlines. It trades about 0.15 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.02 per unit of risk. If you would invest 15,240 in Spotify Technology SA on November 19, 2024 and sell it today you would earn a total of 75,948 from holding Spotify Technology SA or generate 498.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spotify Technology SA vs. American Airlines Group
Performance |
| Timeline |
| Spotify Technology |
| American Airlines |
Spotify Technology and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spotify Technology and American Airlines
The main advantage of trading using opposite Spotify Technology and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Spotify Technology vs. Charter Communications | Spotify Technology vs. Zoom Video Communications | Spotify Technology vs. Verizon Communications | Spotify Technology vs. British American Tobacco |
| American Airlines vs. Metalrgica Riosulense SA | American Airlines vs. Vulcan Materials | American Airlines vs. Metalurgica Gerdau SA | American Airlines vs. GP 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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