Correlation Between Starbucks and Berkshire Hathaway
Can any of the company-specific risk be diversified away by investing in both Starbucks and Berkshire Hathaway 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 Starbucks and Berkshire Hathaway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and Berkshire Hathaway, you can compare the effects of market volatilities on Starbucks and Berkshire Hathaway 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 Starbucks with a short position of Berkshire Hathaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and Berkshire Hathaway.
Diversification Opportunities for Starbucks and Berkshire Hathaway
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Starbucks and Berkshire is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and Berkshire Hathaway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkshire Hathaway and Starbucks 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 Starbucks are associated (or correlated) with Berkshire Hathaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkshire Hathaway has no effect on the direction of Starbucks i.e., Starbucks and Berkshire Hathaway go up and down completely randomly.
Pair Corralation between Starbucks and Berkshire Hathaway
Assuming the 90 days trading horizon Starbucks is expected to generate 1.26 times less return on investment than Berkshire Hathaway. In addition to that, Starbucks is 1.04 times more volatile than Berkshire Hathaway. It trades about 0.2 of its total potential returns per unit of risk. Berkshire Hathaway is currently generating about 0.26 per unit of volatility. If you would invest 13,133 in Berkshire Hathaway on August 30, 2024 and sell it today you would earn a total of 1,182 from holding Berkshire Hathaway or generate 9.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Starbucks vs. Berkshire Hathaway
Performance |
| Timeline |
| Starbucks |
| Berkshire Hathaway |
Starbucks and Berkshire Hathaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Starbucks and Berkshire Hathaway
The main advantage of trading using opposite Starbucks and Berkshire Hathaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks position performs unexpectedly, Berkshire Hathaway 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 Berkshire Hathaway will offset losses from the drop in Berkshire Hathaway's long position.| Starbucks vs. International Meal | Starbucks vs. CA Modas SA | Starbucks vs. Bombril SA | Starbucks vs. Banco do Estado |
| Berkshire Hathaway vs. The Home Depot | Berkshire Hathaway vs. Southwest Airlines Co | Berkshire Hathaway vs. Automatic Data Processing | Berkshire Hathaway vs. Fidelity National Information |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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