Correlation Between Zillow Group and Spotify Technology

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

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

Diversification Opportunities for Zillow Group and Spotify Technology

0.33

Correlation Coefficient

Zillow Group  Spotify Technology

Weak diversification

The 3 months correlation between Zillow and Spotify is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group Class and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology and Zillow Group 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 Zillow Group Class 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 Zillow Group i.e., Zillow Group and Spotify Technology go up and down completely randomly.

Pair Corralation between Zillow Group and Spotify Technology

Taking into account the 90-day investment horizon Zillow Group Class is expected to under-perform the Spotify Technology. But the etf apears to be less risky and, when comparing its historical volatility, Zillow Group Class is 1.35 times less risky than Spotify Technology. The etf trades about -0.03 of its potential returns per unit of risk. The Spotify Technology SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  45,179  in Spotify Technology SA on December 28, 2024 and sell it today you would earn a total of  12,843  from holding Spotify Technology SA or generate 28.43% return on investment over 90 days.

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

Zillow Group Class  vs.  Spotify Technology SA

Zillow Group Class

Risk-Adjusted Performance

Very Weak

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

Spotify Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spotify Technology SA are ranked lower than 11 (%) 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.

Pair Trading with Zillow Group and Spotify Technology

The main advantage of trading using opposite Zillow Group and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zillow Group 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 Zillow Group Class 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.