Correlation Between Spotify Technology and St Galler

Can any of the company-specific risk be diversified away by investing in both Spotify Technology and St Galler 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 St Galler 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 St Galler Kantonalbank, you can compare the effects of market volatilities on Spotify Technology and St Galler 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 St Galler. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and St Galler.

Diversification Opportunities for Spotify Technology and St Galler

0.55

Correlation Coefficient

Spotify Technology  St Galler

Very weak diversification

The 3 months correlation between Spotify and 0QQZ is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and St Galler Kantonalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St Galler Kantonalbank 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 St Galler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St Galler Kantonalbank has no effect on the direction of Spotify Technology i.e., Spotify Technology and St Galler go up and down completely randomly.

Pair Corralation between Spotify Technology and St Galler

Assuming the 90 days trading horizon Spotify Technology SA is expected to under-perform the St Galler. In addition to that, Spotify Technology is 2.4 times more volatile than St Galler Kantonalbank. It trades about -0.07 of its total potential returns per unit of risk. St Galler Kantonalbank is currently generating about 0.24 per unit of volatility. If you would invest  43,200  in St Galler Kantonalbank on October 8, 2024 and sell it today you would earn a total of  1,400  from holding St Galler Kantonalbank or generate 3.24% return on investment over 90 days.

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

Spotify Technology SA  vs.  St Galler Kantonalbank

Spotify Technology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Spotify Technology SA are ranked lower than 18 (%) 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.

St Galler Kantonalbank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in St Galler Kantonalbank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, St Galler may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Spotify Technology and St Galler

The main advantage of trading using opposite Spotify Technology and St Galler positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, St Galler 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 St Galler will offset losses from the drop in St Galler's long position.

The idea behind Spotify Technology SA and St Galler Kantonalbank 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.