Correlation Between Spotify Technology and Yelp
Can any of the company-specific risk be diversified away by investing in both Spotify Technology and Yelp 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 Yelp 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 Yelp Inc, you can compare the effects of market volatilities on Spotify Technology and Yelp 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 Yelp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and Yelp.
Diversification Opportunities for Spotify Technology and Yelp
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Spotify and Yelp is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Yelp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yelp Inc 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 Yelp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yelp Inc has no effect on the direction of Spotify Technology i.e., Spotify Technology and Yelp go up and down completely randomly.
Pair Corralation between Spotify Technology and Yelp
Given the investment horizon of 90 days Spotify Technology SA is expected to generate 1.24 times more return on investment than Yelp. However, Spotify Technology is 1.24 times more volatile than Yelp Inc. It trades about 0.15 of its potential returns per unit of risk. Yelp Inc is currently generating about 0.05 per unit of risk. If you would invest 12,339 in Spotify Technology SA on November 1, 2024 and sell it today you would earn a total of 42,627 from holding Spotify Technology SA or generate 345.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spotify Technology SA vs. Yelp Inc
Performance |
| Timeline |
| Spotify Technology |
| Yelp Inc |
Spotify Technology and Yelp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spotify Technology and Yelp
The main advantage of trading using opposite Spotify Technology and Yelp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, Yelp 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 Yelp will offset losses from the drop in Yelp's long position.| Spotify Technology vs. Snap Inc | Spotify Technology vs. Twilio Inc | Spotify Technology vs. Fiverr International | Spotify Technology vs. Baidu Inc |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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