Correlation Between Spirent Communications and Starbucks
Can any of the company-specific risk be diversified away by investing in both Spirent Communications 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 Spirent Communications and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spirent Communications plc and Starbucks, you can compare the effects of market volatilities on Spirent Communications 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 Spirent Communications with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Starbucks.
Diversification Opportunities for Spirent Communications and Starbucks
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Spirent and Starbucks is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Spirent Communications 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 Spirent Communications plc 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 Spirent Communications i.e., Spirent Communications and Starbucks go up and down completely randomly.
Pair Corralation between Spirent Communications and Starbucks
Assuming the 90 days horizon Spirent Communications plc is expected to generate 0.82 times more return on investment than Starbucks. However, Spirent Communications plc is 1.21 times less risky than Starbucks. It trades about 0.1 of its potential returns per unit of risk. Starbucks is currently generating about 0.06 per unit of risk. If you would invest 202.00 in Spirent Communications plc on September 12, 2024 and sell it today you would earn a total of 14.00 from holding Spirent Communications plc or generate 6.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Spirent Communications plc vs. Starbucks
Performance |
| Timeline |
| Spirent Communications |
| Starbucks |
Spirent Communications and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Starbucks
The main advantage of trading using opposite Spirent Communications and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications 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.| Spirent Communications vs. Superior Plus Corp | Spirent Communications vs. SIVERS SEMICONDUCTORS AB | Spirent Communications vs. Norsk Hydro ASA | Spirent Communications vs. Reliance Steel Aluminum |
| Starbucks vs. Superior Plus Corp | Starbucks vs. SIVERS SEMICONDUCTORS AB | Starbucks vs. NorAm Drilling AS | Starbucks vs. Norsk Hydro ASA |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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