Correlation Between Spotify Technology and Alphabet

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

Diversification Opportunities for Spotify Technology and Alphabet

0.25

Correlation Coefficient

Spotify Technology  Alphabet

Modest diversification

The 3 months correlation between Spotify and Alphabet is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Spotify Technology SA and Alphabet Inc Class C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class C 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class C has no effect on the direction of Spotify Technology i.e., Spotify Technology and Alphabet go up and down completely randomly.

Pair Corralation between Spotify Technology and Alphabet

Given the investment horizon of 90 days Spotify Technology SA is expected to under-perform the Alphabet. In addition to that, Spotify Technology is 1.53 times more volatile than Alphabet Inc Class C. It trades about -0.01 of its total potential returns per unit of risk. Alphabet Inc Class C is currently generating about 0.32 per unit of volatility. If you would invest  17,854  in Alphabet Inc Class C on July 10, 2025 and sell it today you would earn a total of  6,859  from holding Alphabet Inc Class C or generate 38.42% return on investment over 90 days.

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

Spotify Technology SA  vs.  Alphabet Inc Class C

Spotify Technology

Risk-Adjusted Performance

Weakest

Over the last 90 days Spotify Technology SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Spotify Technology is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Alphabet Class C

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spotify Technology and Alphabet

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

The idea behind Spotify Technology SA and Alphabet Inc Class C 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.