Correlation Between Inspiration Healthcare and Spotify Technology

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

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

Diversification Opportunities for Inspiration Healthcare and Spotify Technology

0.85

Correlation Coefficient

Inspiration Healthcare  Spotify Technology

Very poor diversification

The 3 months correlation between Inspiration and Spotify is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Inspiration Healthcare Group and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology and Inspiration Healthcare 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 Inspiration Healthcare Group 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 Inspiration Healthcare i.e., Inspiration Healthcare and Spotify Technology go up and down completely randomly.

Pair Corralation between Inspiration Healthcare and Spotify Technology

Assuming the 90 days trading horizon Inspiration Healthcare Group is expected to generate 1.25 times more return on investment than Spotify Technology. However, Inspiration Healthcare is 1.25 times more volatile than Spotify Technology SA. It trades about 0.16 of its potential returns per unit of risk. Spotify Technology SA is currently generating about 0.18 per unit of risk. If you would invest  1,675  in Inspiration Healthcare Group on April 9, 2025 and sell it today you would earn a total of  525.00  from holding Inspiration Healthcare Group or generate 31.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.77%
Values	Daily Returns

Inspiration Healthcare Group  vs.  Spotify Technology SA

Inspiration Healthcare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inspiration Healthcare Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Inspiration Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Spotify Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inspiration Healthcare and Spotify Technology

The main advantage of trading using opposite Inspiration Healthcare and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inspiration Healthcare 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 Inspiration Healthcare Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.