Correlation Between Spotify Technology and Zillow

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

Diversification Opportunities for Spotify Technology and Zillow

0.9

Correlation Coefficient

Spotify Technology  Zillow

Almost no diversification

The 3 months correlation between Spotify and Zillow is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Zillow Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zillow Group 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 Zillow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zillow Group has no effect on the direction of Spotify Technology i.e., Spotify Technology and Zillow go up and down completely randomly.

Pair Corralation between Spotify Technology and Zillow

Given the investment horizon of 90 days Spotify Technology is expected to generate 1.16 times less return on investment than Zillow. But when comparing it to its historical volatility, Spotify Technology SA is 1.84 times less risky than Zillow. It trades about 0.32 of its potential returns per unit of risk. Zillow Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5,197  in Zillow Group on September 5, 2024 and sell it today you would earn a total of  2,892  from holding Zillow Group or generate 55.65% 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.  Zillow Group

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. 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.

Zillow Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zillow Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Zillow reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spotify Technology and Zillow

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

The idea behind Spotify Technology SA and Zillow Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.