Correlation Between Spotify Technology and Honeywell International
Can any of the company-specific risk be diversified away by investing in both Spotify Technology and Honeywell International 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 Honeywell International 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 Honeywell International, you can compare the effects of market volatilities on Spotify Technology and Honeywell International 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 Honeywell International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and Honeywell International.
Diversification Opportunities for Spotify Technology and Honeywell International
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Spotify and Honeywell is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Honeywell International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honeywell International 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 Honeywell International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honeywell International has no effect on the direction of Spotify Technology i.e., Spotify Technology and Honeywell International go up and down completely randomly.
Pair Corralation between Spotify Technology and Honeywell International
Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 1.42 times more return on investment than Honeywell International. However, Spotify Technology is 1.42 times more volatile than Honeywell International. It trades about 0.46 of its potential returns per unit of risk. Honeywell International is currently generating about 0.37 per unit of risk. If you would invest 54,600 in Spotify Technology SA on September 3, 2024 and sell it today you would earn a total of 17,159 from holding Spotify Technology SA or generate 31.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spotify Technology SA vs. Honeywell International
Performance |
| Timeline |
| Spotify Technology |
| Honeywell International |
Spotify Technology and Honeywell International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spotify Technology and Honeywell International
The main advantage of trading using opposite Spotify Technology and Honeywell International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, Honeywell International 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 Honeywell International will offset losses from the drop in Honeywell International's long position.| Spotify Technology vs. Alphabet | Spotify Technology vs. Alphabet | Spotify Technology vs. Airbnb Inc | Spotify Technology vs. Baidu Inc |
| Honeywell International vs. Bio Techne | Honeywell International vs. Spotify Technology SA | Honeywell International vs. Broadcom | Honeywell International vs. Metalurgica Gerdau SA |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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