Correlation Between CRISPR Therapeutics and Spotify Technology

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

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

Diversification Opportunities for CRISPR Therapeutics and Spotify Technology

0.54

Correlation Coefficient

CRISPR Therapeutics  Spotify Technology

Very weak diversification

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

Pair Corralation between CRISPR Therapeutics and Spotify Technology

Assuming the 90 days trading horizon CRISPR Therapeutics AG is expected to under-perform the Spotify Technology. In addition to that, CRISPR Therapeutics is 1.83 times more volatile than Spotify Technology SA. It trades about -0.31 of its total potential returns per unit of risk. Spotify Technology SA is currently generating about -0.06 per unit of volatility. If you would invest  73,000  in Spotify Technology SA on October 8, 2024 and sell it today you would lose (1,666) from holding Spotify Technology SA or give up 2.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.12%
Values	Daily Returns

CRISPR Therapeutics AG  vs.  Spotify Technology SA

CRISPR Therapeutics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CRISPR Therapeutics AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CRISPR Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. Despite somewhat uncertain basic indicators, Spotify Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CRISPR Therapeutics and Spotify Technology

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

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.