Correlation Between Spotify Technology and Morgan Stanley

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

Diversification Opportunities for Spotify Technology and Morgan Stanley

0.91

Correlation Coefficient

Spotify Technology  Morgan Stanley

Almost no diversification

The 3 months correlation between Spotify and Morgan is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of Spotify Technology i.e., Spotify Technology and Morgan Stanley go up and down completely randomly.

Pair Corralation between Spotify Technology and Morgan Stanley

Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 1.1 times more return on investment than Morgan Stanley. However, Spotify Technology is 1.1 times more volatile than Morgan Stanley. It trades about 0.32 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.26 per unit of risk. If you would invest  45,831  in Spotify Technology SA on September 5, 2024 and sell it today you would earn a total of  30,048  from holding Spotify Technology SA or generate 65.56% return on investment over 90 days.

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

Spotify Technology SA  vs.  Morgan Stanley

Spotify Technology

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Spotify Technology SA are ranked lower than 25 (%) 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.

Morgan Stanley

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Morgan Stanley sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spotify Technology and Morgan Stanley

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

The idea behind Spotify Technology SA and Morgan Stanley 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.