Correlation Between Globalfoundries and Starbucks
Can any of the company-specific risk be diversified away by investing in both Globalfoundries 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 Globalfoundries and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Globalfoundries and Starbucks, you can compare the effects of market volatilities on Globalfoundries 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 Globalfoundries with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globalfoundries and Starbucks.
Diversification Opportunities for Globalfoundries and Starbucks
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Globalfoundries and Starbucks is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Globalfoundries 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 Globalfoundries 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 Globalfoundries i.e., Globalfoundries and Starbucks go up and down completely randomly.
Pair Corralation between Globalfoundries and Starbucks
Considering the 90-day investment horizon Globalfoundries is expected to generate 3.64 times more return on investment than Starbucks. However, Globalfoundries is 3.64 times more volatile than Starbucks. It trades about 0.22 of its potential returns per unit of risk. Starbucks is currently generating about 0.16 per unit of risk. If you would invest 3,601 in Globalfoundries on September 5, 2024 and sell it today you would earn a total of 837.00 from holding Globalfoundries or generate 23.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Globalfoundries vs. Starbucks
Performance |
| Timeline |
| Globalfoundries |
| Starbucks |
Globalfoundries and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Globalfoundries and Starbucks
The main advantage of trading using opposite Globalfoundries and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globalfoundries 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.| Globalfoundries vs. NXP Semiconductors NV | Globalfoundries vs. Analog Devices | Globalfoundries vs. ON Semiconductor | Globalfoundries vs. Lattice Semiconductor |
| Starbucks vs. Hyatt Hotels | Starbucks vs. Smart Share Global | Starbucks vs. Wyndham Hotels Resorts | Starbucks vs. WW International |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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