Correlation Between Starbucks and Gourmet Provisions
Can any of the company-specific risk be diversified away by investing in both Starbucks and Gourmet Provisions 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 Gourmet Provisions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and Gourmet Provisions International, you can compare the effects of market volatilities on Starbucks and Gourmet Provisions 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 Gourmet Provisions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and Gourmet Provisions.
Diversification Opportunities for Starbucks and Gourmet Provisions
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Starbucks and Gourmet is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and Gourmet Provisions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gourmet Provisions 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 Gourmet Provisions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gourmet Provisions has no effect on the direction of Starbucks i.e., Starbucks and Gourmet Provisions go up and down completely randomly.
Pair Corralation between Starbucks and Gourmet Provisions
Given the investment horizon of 90 days Starbucks is expected to generate 128.11 times less return on investment than Gourmet Provisions. But when comparing it to its historical volatility, Starbucks is 15.87 times less risky than Gourmet Provisions. It trades about 0.01 of its potential returns per unit of risk. Gourmet Provisions International is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.81 in Gourmet Provisions International on August 29, 2024 and sell it today you would lose (0.80) from holding Gourmet Provisions International or give up 98.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Starbucks vs. Gourmet Provisions Internation
Performance |
| Timeline |
| Starbucks |
| Gourmet Provisions |
Starbucks and Gourmet Provisions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Starbucks and Gourmet Provisions
The main advantage of trading using opposite Starbucks and Gourmet Provisions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks position performs unexpectedly, Gourmet Provisions 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 Gourmet Provisions will offset losses from the drop in Gourmet Provisions' long position.| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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