Correlation Between Starbucks and Mitra Energi

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

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

Diversification Opportunities for Starbucks and Mitra Energi

0.62

Correlation Coefficient

Starbucks  Mitra Energi

Poor diversification

The 3 months correlation between Starbucks and Mitra is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and Mitra Energi Persada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitra Energi Persada 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 Mitra Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitra Energi Persada has no effect on the direction of Starbucks i.e., Starbucks and Mitra Energi go up and down completely randomly.

Pair Corralation between Starbucks and Mitra Energi

Assuming the 90 days trading horizon Starbucks is expected to generate 0.41 times more return on investment than Mitra Energi. However, Starbucks is 2.45 times less risky than Mitra Energi. It trades about -0.08 of its potential returns per unit of risk. Mitra Energi Persada is currently generating about -0.13 per unit of risk. If you would invest  204,238  in Starbucks on September 12, 2024 and sell it today you would lose (5,038) from holding Starbucks or give up 2.47% of portfolio value over 90 days.

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

Starbucks  vs.  Mitra Energi Persada

Starbucks

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Starbucks is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mitra Energi Persada

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitra Energi Persada are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Mitra Energi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Starbucks and Mitra Energi

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

The idea behind Starbucks and Mitra Energi Persada 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.