Correlation Between Dow Jones and Spotify Technology

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

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

Diversification Opportunities for Dow Jones and Spotify Technology

0.25

Correlation Coefficient

Dow Jones  Spotify Technology

Modest diversification

The 3 months correlation between Dow and Spotify is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Spotify Technology go up and down completely randomly.

Pair Corralation between Dow Jones and Spotify Technology

Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.24 times more return on investment than Spotify Technology. However, Dow Jones Industrial is 4.14 times less risky than Spotify Technology. It trades about 0.09 of its potential returns per unit of risk. Spotify Technology SA is currently generating about -0.01 per unit of risk. If you would invest  4,482,853  in Dow Jones Industrial on July 3, 2025 and sell it today you would earn a total of  156,936  from holding Dow Jones Industrial or generate 3.5% return on investment over 90 days.

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

Dow Jones Industrial  vs.  Spotify Technology SA

Pair Trading with Dow Jones and Spotify Technology

The main advantage of trading using opposite Dow Jones and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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 Dow Jones Industrial 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.