Correlation Between XLMedia PLC and Spotify Technology

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

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

Diversification Opportunities for XLMedia PLC and Spotify Technology

0.2

Correlation Coefficient

XLMedia PLC  Spotify Technology

Modest diversification

The 3 months correlation between XLMedia and Spotify is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding XLMedia PLC and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology and XLMedia PLC 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 XLMedia PLC 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 XLMedia PLC i.e., XLMedia PLC and Spotify Technology go up and down completely randomly.

Pair Corralation between XLMedia PLC and Spotify Technology

Assuming the 90 days trading horizon XLMedia PLC is expected to generate 1.45 times less return on investment than Spotify Technology. In addition to that, XLMedia PLC is 2.87 times more volatile than Spotify Technology SA. It trades about 0.04 of its total potential returns per unit of risk. Spotify Technology SA is currently generating about 0.15 per unit of volatility. If you would invest  18,600  in Spotify Technology SA on October 9, 2024 and sell it today you would earn a total of  25,725  from holding Spotify Technology SA or generate 138.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.81%
Values	Daily Returns

XLMedia PLC  vs.  Spotify Technology SA

XLMedia PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XLMedia PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, XLMedia PLC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. In spite of comparatively unsteady basic indicators, Spotify Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XLMedia PLC and Spotify Technology

The main advantage of trading using opposite XLMedia PLC and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XLMedia PLC 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 XLMedia PLC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..