Correlation Between Smart Share and Starbucks
Can any of the company-specific risk be diversified away by investing in both Smart Share 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 Smart Share and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smart Share Global and Starbucks, you can compare the effects of market volatilities on Smart Share 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 Smart Share with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart Share and Starbucks.
Diversification Opportunities for Smart Share and Starbucks
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Smart and Starbucks is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Smart Share Global and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Smart Share 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 Smart Share Global 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 Smart Share i.e., Smart Share and Starbucks go up and down completely randomly.
Pair Corralation between Smart Share and Starbucks
Allowing for the 90-day total investment horizon Smart Share is expected to generate 2.67 times less return on investment than Starbucks. In addition to that, Smart Share is 1.83 times more volatile than Starbucks. It trades about 0.04 of its total potential returns per unit of risk. Starbucks is currently generating about 0.19 per unit of volatility. If you would invest 9,643 in Starbucks on September 4, 2024 and sell it today you would earn a total of 508.00 from holding Starbucks or generate 5.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smart Share Global vs. Starbucks
Performance |
| Timeline |
| Smart Share Global |
| Starbucks |
Smart Share and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smart Share and Starbucks
The main advantage of trading using opposite Smart Share and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart Share 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.| Smart Share vs. Frontdoor | Smart Share vs. Bright Horizons Family | Smart Share vs. Mister Car Wash | Smart Share vs. Carriage Services |
| Starbucks vs. Hyatt Hotels | Starbucks vs. Smart Share Global | Starbucks vs. Sweetgreen | Starbucks vs. Wyndham Hotels Resorts |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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