Correlation Between American Hotel and Starbucks
Can any of the company-specific risk be diversified away by investing in both American Hotel 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 American Hotel and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Hotel Income and Starbucks, you can compare the effects of market volatilities on American Hotel 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 American Hotel with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Hotel and Starbucks.
Diversification Opportunities for American Hotel and Starbucks
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and Starbucks is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding American Hotel Income and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and American Hotel 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 American Hotel Income 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 American Hotel i.e., American Hotel and Starbucks go up and down completely randomly.
Pair Corralation between American Hotel and Starbucks
Assuming the 90 days horizon American Hotel Income is expected to generate 1.78 times more return on investment than Starbucks. However, American Hotel is 1.78 times more volatile than Starbucks. It trades about 0.08 of its potential returns per unit of risk. Starbucks is currently generating about 0.1 per unit of risk. If you would invest 34.00 in American Hotel Income on October 26, 2024 and sell it today you would earn a total of 13.00 from holding American Hotel Income or generate 38.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Hotel Income vs. Starbucks
Performance |
| Timeline |
| American Hotel Income |
| Starbucks |
American Hotel and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Hotel and Starbucks
The main advantage of trading using opposite American Hotel and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Hotel 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.| American Hotel vs. Ashford Hospitality Trust | American Hotel vs. Ashford Hospitality Trust | American Hotel vs. Braemar Hotels Resorts | American Hotel vs. Braemar Hotels Resorts |
| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza Common | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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