Correlation Between Starbucks and Seojin System

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

By analyzing existing cross correlation between Starbucks and Seojin System CoLtd, you can compare the effects of market volatilities on Starbucks and Seojin System 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 Seojin System. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and Seojin System.

Diversification Opportunities for Starbucks and Seojin System

0.15

Correlation Coefficient

Starbucks  Seojin System

Average diversification

The 3 months correlation between Starbucks and Seojin is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and Seojin System CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seojin System CoLtd 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 Seojin System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seojin System CoLtd has no effect on the direction of Starbucks i.e., Starbucks and Seojin System go up and down completely randomly.

Pair Corralation between Starbucks and Seojin System

Assuming the 90 days trading horizon Starbucks is expected to generate 1.31 times less return on investment than Seojin System. But when comparing it to its historical volatility, Starbucks is 2.21 times less risky than Seojin System. It trades about 0.15 of its potential returns per unit of risk. Seojin System CoLtd is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,425,000  in Seojin System CoLtd on September 5, 2024 and sell it today you would earn a total of  370,000  from holding Seojin System CoLtd or generate 15.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Starbucks  vs.  Seojin System CoLtd

Starbucks

Risk-Adjusted Performance

11 of 100

OK

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 weak basic indicators, Starbucks showed solid returns over the last few months and may actually be approaching a breakup point.

Seojin System CoLtd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Seojin System CoLtd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Seojin System sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Starbucks and Seojin System

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

The idea behind Starbucks and Seojin System CoLtd 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.