Correlation Between Starbucks and So Martinho

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

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

Diversification Opportunities for Starbucks and So Martinho

-0.72

Correlation Coefficient

Starbucks  So Martinho

Pay attention - limited upside

The 3 months correlation between Starbucks and SMTO3 is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and So Martinho SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on So Martinho SA and Starbucks 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 Starbucks are associated (or correlated) with So Martinho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of So Martinho SA has no effect on the direction of Starbucks i.e., Starbucks and So Martinho go up and down completely randomly.

Pair Corralation between Starbucks and So Martinho

Assuming the 90 days trading horizon Starbucks is expected to generate 0.83 times more return on investment than So Martinho. However, Starbucks is 1.2 times less risky than So Martinho. It trades about 0.16 of its potential returns per unit of risk. So Martinho SA is currently generating about -0.04 per unit of risk. If you would invest  52,484  in Starbucks on September 3, 2024 and sell it today you would earn a total of  8,254  from holding Starbucks or generate 15.73% return on investment over 90 days.

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

Starbucks  vs.  So Martinho SA

Starbucks

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Starbucks sustained solid returns over the last few months and may actually be approaching a breakup point.

So Martinho SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Starbucks and So Martinho

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

The idea behind Starbucks and So Martinho 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.