Correlation Between Tres Tentos and Spotify Technology

Can any of the company-specific risk be diversified away by investing in both Tres Tentos and Spotify Technology 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 Tres Tentos and Spotify Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tres Tentos Agroindustrial and Spotify Technology SA, you can compare the effects of market volatilities on Tres Tentos and Spotify Technology 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 Tres Tentos with a short position of Spotify Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tres Tentos and Spotify Technology.

Diversification Opportunities for Tres Tentos and Spotify Technology

0.92

Correlation Coefficient

Tres Tentos  Spotify Technology

Almost no diversification

The 3 months correlation between Tres and Spotify is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Tres Tentos Agroindustrial and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology and Tres Tentos 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 Tres Tentos Agroindustrial are associated (or correlated) with Spotify Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spotify Technology has no effect on the direction of Tres Tentos i.e., Tres Tentos and Spotify Technology go up and down completely randomly.

Pair Corralation between Tres Tentos and Spotify Technology

Assuming the 90 days trading horizon Tres Tentos is expected to generate 6.41 times less return on investment than Spotify Technology. But when comparing it to its historical volatility, Tres Tentos Agroindustrial is 1.06 times less risky than Spotify Technology. It trades about 0.02 of its potential returns per unit of risk. Spotify Technology SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  18,844  in Spotify Technology SA on October 12, 2024 and sell it today you would earn a total of  54,409  from holding Spotify Technology SA or generate 288.73% return on investment over 90 days.

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

Tres Tentos Agroindustrial  vs.  Spotify Technology SA

Tres Tentos Agroindu

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tres Tentos Agroindustrial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Tres Tentos unveiled solid returns over the last few months and may actually be approaching a breakup point.

Spotify Technology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Spotify Technology SA are ranked lower than 18 (%) 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.

Pair Trading with Tres Tentos and Spotify Technology

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

The idea behind Tres Tentos Agroindustrial and Spotify Technology SA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.