Correlation Between VARIOUS EATERIES and Starbucks

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

By analyzing existing cross correlation between VARIOUS EATERIES LS and Starbucks, you can compare the effects of market volatilities on VARIOUS EATERIES and Starbucks 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 VARIOUS EATERIES with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of VARIOUS EATERIES and Starbucks.

Diversification Opportunities for VARIOUS EATERIES and Starbucks

0.09

Correlation Coefficient

VARIOUS EATERIES  Starbucks

Significant diversification

The 3 months correlation between VARIOUS and Starbucks is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding VARIOUS EATERIES LS and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and VARIOUS EATERIES 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 VARIOUS EATERIES LS are associated (or correlated) with Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of VARIOUS EATERIES i.e., VARIOUS EATERIES and Starbucks go up and down completely randomly.

Pair Corralation between VARIOUS EATERIES and Starbucks

Assuming the 90 days horizon VARIOUS EATERIES is expected to generate 11.95 times less return on investment than Starbucks. In addition to that, VARIOUS EATERIES is 1.21 times more volatile than Starbucks. It trades about 0.01 of its total potential returns per unit of risk. Starbucks is currently generating about 0.11 per unit of volatility. If you would invest  8,626  in Starbucks on September 14, 2024 and sell it today you would earn a total of  725.00  from holding Starbucks or generate 8.4% return on investment over 90 days.

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

VARIOUS EATERIES LS  vs.  Starbucks

VARIOUS EATERIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VARIOUS EATERIES LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VARIOUS EATERIES is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Starbucks

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Starbucks may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with VARIOUS EATERIES and Starbucks

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

The idea behind VARIOUS EATERIES LS and Starbucks 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.