Correlation Between Spotify Technology and Bosideng International

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

Diversification Opportunities for Spotify Technology and Bosideng International

0.04

Correlation Coefficient

Spotify Technology  Bosideng International

Significant diversification

The 3 months correlation between Spotify and Bosideng is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Bosideng International Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bosideng International 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 Bosideng International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bosideng International has no effect on the direction of Spotify Technology i.e., Spotify Technology and Bosideng International go up and down completely randomly.

Pair Corralation between Spotify Technology and Bosideng International

Given the investment horizon of 90 days Spotify Technology SA is expected to generate 0.98 times more return on investment than Bosideng International. However, Spotify Technology SA is 1.02 times less risky than Bosideng International. It trades about 0.12 of its potential returns per unit of risk. Bosideng International Holdings is currently generating about -0.01 per unit of risk. If you would invest  45,179  in Spotify Technology SA on December 30, 2024 and sell it today you would earn a total of  10,937  from holding Spotify Technology SA or generate 24.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Spotify Technology SA  vs.  Bosideng International Holding

Spotify Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spotify Technology SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Spotify Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bosideng International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bosideng International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Bosideng International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spotify Technology and Bosideng International

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

The idea behind Spotify Technology SA and Bosideng International Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.