Correlation Between Spotify Technology and Phillips
Can any of the company-specific risk be diversified away by investing in both Spotify Technology and Phillips 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 Phillips 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 Phillips 66, you can compare the effects of market volatilities on Spotify Technology and Phillips 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 Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and Phillips.
Diversification Opportunities for Spotify Technology and Phillips
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Spotify and Phillips is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 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 Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of Spotify Technology i.e., Spotify Technology and Phillips go up and down completely randomly.
Pair Corralation between Spotify Technology and Phillips
Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 2.35 times more return on investment than Phillips. However, Spotify Technology is 2.35 times more volatile than Phillips 66. It trades about 0.2 of its potential returns per unit of risk. Phillips 66 is currently generating about 0.1 per unit of risk. If you would invest 71,334 in Spotify Technology SA on November 4, 2024 and sell it today you would earn a total of 8,906 from holding Spotify Technology SA or generate 12.48% 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. Phillips 66
Performance |
| Timeline |
| Spotify Technology |
| Phillips 66 |
Spotify Technology and Phillips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spotify Technology and Phillips
The main advantage of trading using opposite Spotify Technology and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, Phillips 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 Phillips will offset losses from the drop in Phillips' long position.| Spotify Technology vs. Alaska Air Group, | Spotify Technology vs. Zoom Video Communications | Spotify Technology vs. Warner Music Group | Spotify Technology vs. Taiwan Semiconductor Manufacturing |
| Phillips vs. Charter Communications | Phillips vs. United Natural Foods, | Phillips vs. Vulcan Materials | Phillips vs. Eastman Chemical |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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