Correlation Between Spotify Technology and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Spotify Technology and Meta Platforms 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 Meta Platforms 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 Meta Platforms, you can compare the effects of market volatilities on Spotify Technology and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and Meta Platforms.
Diversification Opportunities for Spotify Technology and Meta Platforms
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Spotify and Meta is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Spotify Technology i.e., Spotify Technology and Meta Platforms go up and down completely randomly.
Pair Corralation between Spotify Technology and Meta Platforms
Given the investment horizon of 90 days Spotify Technology SA is expected to generate 0.98 times more return on investment than Meta Platforms. However, Spotify Technology SA is 1.02 times less risky than Meta Platforms. It trades about 0.16 of its potential returns per unit of risk. Meta Platforms is currently generating about 0.14 per unit of risk. If you would invest 8,031 in Spotify Technology SA on August 23, 2024 and sell it today you would earn a total of 39,039 from holding Spotify Technology SA or generate 486.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spotify Technology SA vs. Meta Platforms
Performance |
| Timeline |
| Spotify Technology |
| Meta Platforms |
Spotify Technology and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spotify Technology and Meta Platforms
The main advantage of trading using opposite Spotify Technology and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.| Spotify Technology vs. Snap Inc | Spotify Technology vs. Twilio Inc | Spotify Technology vs. Fiverr International | Spotify Technology vs. Baidu Inc |
| Meta Platforms vs. Zillow Group Class | Meta Platforms vs. Outbrain | Meta Platforms vs. TuanChe ADR | Meta Platforms vs. Weibo Corp |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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