Correlation Between Joint Stock and Starbucks

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

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

Diversification Opportunities for Joint Stock and Starbucks

-0.33

Correlation Coefficient

Joint Stock  Starbucks

Very good diversification

The 3 months correlation between Joint and Starbucks is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Joint Stock and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Joint Stock 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 Joint Stock 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 Joint Stock i.e., Joint Stock and Starbucks go up and down completely randomly.

Pair Corralation between Joint Stock and Starbucks

Given the investment horizon of 90 days Joint Stock is expected to under-perform the Starbucks. In addition to that, Joint Stock is 2.48 times more volatile than Starbucks. It trades about -0.08 of its total potential returns per unit of risk. Starbucks is currently generating about 0.14 per unit of volatility. If you would invest  9,100  in Starbucks on September 5, 2024 and sell it today you would earn a total of  1,057  from holding Starbucks or generate 11.62% return on investment over 90 days.

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

Joint Stock  vs.  Starbucks

Joint Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Joint Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Starbucks

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Starbucks may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Joint Stock and Starbucks

The main advantage of trading using opposite Joint Stock and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Joint Stock 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 Joint Stock 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.