Correlation Between Spotify Technology and DouYu International

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

Diversification Opportunities for Spotify Technology and DouYu International

0.45

Correlation Coefficient

Spotify Technology  DouYu International

Very weak diversification

The 3 months correlation between Spotify and DouYu is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and DouYu International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DouYu International 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 DouYu International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DouYu International has no effect on the direction of Spotify Technology i.e., Spotify Technology and DouYu International go up and down completely randomly.

Pair Corralation between Spotify Technology and DouYu International

Given the investment horizon of 90 days Spotify Technology SA is expected to generate 0.43 times more return on investment than DouYu International. However, Spotify Technology SA is 2.32 times less risky than DouYu International. It trades about 0.15 of its potential returns per unit of risk. DouYu International Holdings is currently generating about 0.03 per unit of risk. If you would invest  15,356  in Spotify Technology SA on February 4, 2025 and sell it today you would earn a total of  49,044  from holding Spotify Technology SA or generate 319.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.74%
Values	Daily Returns

Spotify Technology SA  vs.  DouYu International Holdings

Spotify Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spotify Technology SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Spotify Technology may actually be approaching a critical reversion point that can send shares even higher in June 2025.

DouYu International

Risk-Adjusted Performance

Very Weak

Over the last 90 days DouYu International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Spotify Technology and DouYu International

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

The idea behind Spotify Technology SA and DouYu International Holdings 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.

Check out your portfolio center.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.