Correlation Between X FAB and Spotify Technology

Can any of the company-specific risk be diversified away by investing in both X FAB 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 X FAB and Spotify Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between X FAB Silicon Foundries and Spotify Technology SA, you can compare the effects of market volatilities on X FAB 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 X FAB with a short position of Spotify Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Spotify Technology.

Diversification Opportunities for X FAB and Spotify Technology

-0.54

Correlation Coefficient

X FAB  Spotify Technology

Excellent diversification

The 3 months correlation between 0ROZ and Spotify is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology and X FAB 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 X FAB Silicon Foundries 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 X FAB i.e., X FAB and Spotify Technology go up and down completely randomly.

Pair Corralation between X FAB and Spotify Technology

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 3.67 times more return on investment than Spotify Technology. However, X FAB is 3.67 times more volatile than Spotify Technology SA. It trades about 0.12 of its potential returns per unit of risk. Spotify Technology SA is currently generating about 0.28 per unit of risk. If you would invest  491.00  in X FAB Silicon Foundries on September 12, 2024 and sell it today you would earn a total of  309.00  from holding X FAB Silicon Foundries or generate 62.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

X FAB Silicon Foundries  vs.  Spotify Technology SA

X FAB Silicon

Risk-Adjusted Performance

9 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, X FAB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Spotify Technology

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Spotify Technology SA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Spotify Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X FAB and Spotify Technology

The main advantage of trading using opposite X FAB and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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.

The idea behind X FAB Silicon Foundries and Spotify Technology SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.