Correlation Between Spotify Technology and 3I Group
Can any of the company-specific risk be diversified away by investing in both Spotify Technology and 3I Group 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 3I Group 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 3I Group PLC, you can compare the effects of market volatilities on Spotify Technology and 3I Group 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 3I Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spotify Technology and 3I Group.
Diversification Opportunities for Spotify Technology and 3I Group
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Spotify and III is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and 3I Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3I Group PLC 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 3I Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3I Group PLC has no effect on the direction of Spotify Technology i.e., Spotify Technology and 3I Group go up and down completely randomly.
Pair Corralation between Spotify Technology and 3I Group
Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 1.74 times more return on investment than 3I Group. However, Spotify Technology is 1.74 times more volatile than 3I Group PLC. It trades about 0.25 of its potential returns per unit of risk. 3I Group PLC is currently generating about 0.22 per unit of risk. If you would invest 35,575 in Spotify Technology SA on October 31, 2024 and sell it today you would earn a total of 15,015 from holding Spotify Technology SA or generate 42.21% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 98.39% |
Values | Daily Returns |
Spotify Technology SA vs. 3I Group PLC
Performance |
Timeline |
Spotify Technology |
3I Group PLC |
Spotify Technology and 3I Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Spotify Technology and 3I Group
The main advantage of trading using opposite Spotify Technology and 3I Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spotify Technology position performs unexpectedly, 3I Group 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 3I Group will offset losses from the drop in 3I Group's long position.Spotify Technology vs. Cellnex Telecom SA | ||
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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