Correlation Between CMR SAB and Starbucks
Can any of the company-specific risk be diversified away by investing in both CMR SAB 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 CMR SAB and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMR SAB de and Starbucks, you can compare the effects of market volatilities on CMR SAB 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 CMR SAB with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMR SAB and Starbucks.
Diversification Opportunities for CMR SAB and Starbucks
Modest diversification
The 3 months correlation between CMR and Starbucks is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding CMR SAB de and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and CMR SAB 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 CMR SAB de 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 CMR SAB i.e., CMR SAB and Starbucks go up and down completely randomly.
Pair Corralation between CMR SAB and Starbucks
Assuming the 90 days trading horizon CMR SAB de is expected to under-perform the Starbucks. In addition to that, CMR SAB is 2.29 times more volatile than Starbucks. It trades about -0.09 of its total potential returns per unit of risk. Starbucks is currently generating about 0.17 per unit of volatility. If you would invest 195,500 in Starbucks on August 27, 2024 and sell it today you would earn a total of 13,449 from holding Starbucks or generate 6.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMR SAB de vs. Starbucks
Performance |
| Timeline |
| CMR SAB de |
| Starbucks |
CMR SAB and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMR SAB and Starbucks
The main advantage of trading using opposite CMR SAB and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMR SAB 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.| CMR SAB vs. Taiwan Semiconductor Manufacturing | CMR SAB vs. Alibaba Group Holding | CMR SAB vs. The Select Sector | CMR SAB vs. Promotora y Operadora |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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