Correlation Between Jacobs Solutions and Starbucks
Can any of the company-specific risk be diversified away by investing in both Jacobs Solutions 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 Jacobs Solutions and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jacobs Solutions and Starbucks, you can compare the effects of market volatilities on Jacobs Solutions 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 Jacobs Solutions with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jacobs Solutions and Starbucks.
Diversification Opportunities for Jacobs Solutions and Starbucks
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Jacobs and Starbucks is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Jacobs Solutions 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 Jacobs Solutions 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 Jacobs Solutions i.e., Jacobs Solutions and Starbucks go up and down completely randomly.
Pair Corralation between Jacobs Solutions and Starbucks
Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 2.23 times less return on investment than Starbucks. But when comparing it to its historical volatility, Jacobs Solutions is 2.07 times less risky than Starbucks. It trades about 0.12 of its potential returns per unit of risk. Starbucks is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 7,297 in Starbucks on November 3, 2024 and sell it today you would earn a total of 3,471 from holding Starbucks or generate 47.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jacobs Solutions vs. Starbucks
Performance |
| Timeline |
| Jacobs Solutions |
| Starbucks |
Jacobs Solutions and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jacobs Solutions and Starbucks
The main advantage of trading using opposite Jacobs Solutions and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jacobs Solutions 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.| Jacobs Solutions vs. KBR Inc | Jacobs Solutions vs. Tetra Tech | Jacobs Solutions vs. Fluor | Jacobs Solutions vs. Topbuild Corp |
| 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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