Correlation Between United Airlines and Spotify Technology
Can any of the company-specific risk be diversified away by investing in both United Airlines and Spotify Technology 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 United Airlines and Spotify Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Airlines Holdings and Spotify Technology SA, you can compare the effects of market volatilities on United Airlines and Spotify Technology 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 United Airlines with a short position of Spotify Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Spotify Technology.
Diversification Opportunities for United Airlines and Spotify Technology
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between United and Spotify is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology and United Airlines 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 United Airlines Holdings are associated (or correlated) with Spotify Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spotify Technology has no effect on the direction of United Airlines i.e., United Airlines and Spotify Technology go up and down completely randomly.
Pair Corralation between United Airlines and Spotify Technology
Assuming the 90 days trading horizon United Airlines is expected to generate 2.09 times less return on investment than Spotify Technology. But when comparing it to its historical volatility, United Airlines Holdings is 1.23 times less risky than Spotify Technology. It trades about 0.12 of its potential returns per unit of risk. Spotify Technology SA is currently generating about 0.2 of returns per unit of risk over similar time horizon. 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 | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. Spotify Technology SA
Performance |
| Timeline |
| United Airlines Holdings |
| Spotify Technology |
United Airlines and Spotify Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Spotify Technology
The main advantage of trading using opposite United Airlines and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines position performs unexpectedly, Spotify Technology 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 Spotify Technology will offset losses from the drop in Spotify Technology's long position.| United Airlines vs. Delta Air Lines | United Airlines vs. American Airlines Group | United Airlines vs. Alaska Air Group, | United Airlines vs. Gol Linhas Areas |
| Spotify Technology vs. Alaska Air Group, | Spotify Technology vs. Zoom Video Communications | Spotify Technology vs. Warner Music Group | Spotify Technology vs. Taiwan Semiconductor Manufacturing |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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