Correlation Between Starbucks and Bt Brands
Can any of the company-specific risk be diversified away by investing in both Starbucks and Bt Brands 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 Bt Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and Bt Brands, you can compare the effects of market volatilities on Starbucks and Bt Brands 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 Bt Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and Bt Brands.
Diversification Opportunities for Starbucks and Bt Brands
Good diversification
The 3 months correlation between Starbucks and BTBD is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands 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 Bt Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bt Brands has no effect on the direction of Starbucks i.e., Starbucks and Bt Brands go up and down completely randomly.
Pair Corralation between Starbucks and Bt Brands
Given the investment horizon of 90 days Starbucks is expected to generate 0.29 times more return on investment than Bt Brands. However, Starbucks is 3.4 times less risky than Bt Brands. It trades about 0.1 of its potential returns per unit of risk. Bt Brands is currently generating about 0.02 per unit of risk. If you would invest 9,689 in Starbucks on August 30, 2024 and sell it today you would earn a total of 462.00 from holding Starbucks or generate 4.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Starbucks vs. Bt Brands
Performance |
| Timeline |
| Starbucks |
| Bt Brands |
Starbucks and Bt Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Starbucks and Bt Brands
The main advantage of trading using opposite Starbucks and Bt Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks position performs unexpectedly, Bt Brands 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 Bt Brands will offset losses from the drop in Bt Brands' long position.| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
| Bt Brands vs. Chipotle Mexican Grill | Bt Brands vs. Yum Brands | Bt Brands vs. The Wendys Co | Bt Brands vs. McDonalds |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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