Correlation Between Spotify Technology and Western Union

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

Diversification Opportunities for Spotify Technology and Western Union

0.27

Correlation Coefficient

Spotify Technology  Western Union

Modest diversification

The 3 months correlation between Spotify and Western is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and The Western Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union 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 Western Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Union has no effect on the direction of Spotify Technology i.e., Spotify Technology and Western Union go up and down completely randomly.

Pair Corralation between Spotify Technology and Western Union

Assuming the 90 days trading horizon Spotify Technology SA is expected to generate 1.78 times more return on investment than Western Union. However, Spotify Technology is 1.78 times more volatile than The Western Union. It trades about 0.21 of its potential returns per unit of risk. The Western Union is currently generating about -0.01 per unit of risk. If you would invest  55,400  in Spotify Technology SA on October 22, 2024 and sell it today you would earn a total of  20,496  from holding Spotify Technology SA or generate 37.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.61%
Values	Daily Returns

Spotify Technology SA  vs.  The Western Union

Spotify Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Spotify Technology SA are ranked lower than 16 (%) 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.

Western Union

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Western Union has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Western Union is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spotify Technology and Western Union

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

The idea behind Spotify Technology SA and The Western Union 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.