Correlation Between Spotify Technology and Tyson Foods

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

Diversification Opportunities for Spotify Technology and Tyson Foods

-0.55

Correlation Coefficient

Spotify Technology  Tyson Foods

Excellent diversification

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

Pair Corralation between Spotify Technology and Tyson Foods

Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 1.3 times more return on investment than Tyson Foods. However, Spotify Technology is 1.3 times more volatile than Tyson Foods. It trades about 0.16 of its potential returns per unit of risk. Tyson Foods is currently generating about 0.1 per unit of risk. If you would invest  31,531  in Spotify Technology SA on December 4, 2024 and sell it today you would earn a total of  53,871  from holding Spotify Technology SA or generate 170.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	53.85%
Values	Daily Returns

Spotify Technology SA  vs.  Tyson Foods

Spotify Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Spotify Technology SA are ranked lower than 6 (%) 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.

Tyson Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tyson Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Spotify Technology and Tyson Foods

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

The idea behind Spotify Technology SA and Tyson Foods 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.