Correlation Between Spotify Technology and BlackRock

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

Diversification Opportunities for Spotify Technology and BlackRock

0.64

Correlation Coefficient

Spotify Technology  BlackRock

Poor diversification

The 3 months correlation between Spotify and BlackRock is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock 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 BlackRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock has no effect on the direction of Spotify Technology i.e., Spotify Technology and BlackRock go up and down completely randomly.

Pair Corralation between Spotify Technology and BlackRock

Assuming the 90 days trading horizon Spotify Technology SA is expected to under-perform the BlackRock. In addition to that, Spotify Technology is 1.04 times more volatile than BlackRock. It trades about -0.06 of its total potential returns per unit of risk. BlackRock is currently generating about -0.04 per unit of volatility. If you would invest  9,796  in BlackRock on October 8, 2024 and sell it today you would lose (164.00) from holding BlackRock or give up 1.67% of portfolio value over 90 days.

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

Spotify Technology SA  vs.  BlackRock

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

BlackRock

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BlackRock sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spotify Technology and BlackRock

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

The idea behind Spotify Technology SA and BlackRock 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.