Correlation Between Spotify Technology and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Spotify Technology and Alibaba Group 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 Alibaba Group 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 Alibaba Group Holding, you can compare the effects of market volatilities on Spotify Technology and Alibaba Group 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 Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and Alibaba Group.
Diversification Opportunities for Spotify Technology and Alibaba Group
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Spotify and Alibaba is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding 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 Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Spotify Technology i.e., Spotify Technology and Alibaba Group go up and down completely randomly.
Pair Corralation between Spotify Technology and Alibaba Group
Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 1.05 times more return on investment than Alibaba Group. However, Spotify Technology is 1.05 times more volatile than Alibaba Group Holding. It trades about 0.11 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.22 per unit of risk. If you would invest 70,651 in Spotify Technology SA on October 12, 2024 and sell it today you would earn a total of 2,602 from holding Spotify Technology SA or generate 3.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spotify Technology SA vs. Alibaba Group Holding
Performance |
| Timeline |
| Spotify Technology |
| Alibaba Group Holding |
Spotify Technology and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spotify Technology and Alibaba Group
The main advantage of trading using opposite Spotify Technology and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, Alibaba Group 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 Alibaba Group will offset losses from the drop in Alibaba Group's long position.| Spotify Technology vs. Darden Restaurants, | Spotify Technology vs. Vulcan Materials | Spotify Technology vs. JB Hunt Transport | Spotify Technology vs. GP Investments |
| Alibaba Group vs. Micron Technology | Alibaba Group vs. Spotify Technology SA | Alibaba Group vs. Microchip Technology Incorporated | Alibaba Group vs. Liberty Broadband |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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