Correlation Between Starbucks and GMS
Can any of the company-specific risk be diversified away by investing in both Starbucks and GMS 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 GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and GMS Inc, you can compare the effects of market volatilities on Starbucks and GMS 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 GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and GMS.
Diversification Opportunities for Starbucks and GMS
Poor diversification
The 3 months correlation between Starbucks and GMS is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc 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 GMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMS Inc has no effect on the direction of Starbucks i.e., Starbucks and GMS go up and down completely randomly.
Pair Corralation between Starbucks and GMS
Given the investment horizon of 90 days Starbucks is expected to generate 0.72 times more return on investment than GMS. However, Starbucks is 1.39 times less risky than GMS. It trades about -0.05 of its potential returns per unit of risk. GMS Inc is currently generating about -0.22 per unit of risk. If you would invest 9,969 in Starbucks on September 12, 2024 and sell it today you would lose (153.00) from holding Starbucks or give up 1.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Starbucks vs. GMS Inc
Performance |
| Timeline |
| Starbucks |
| GMS Inc |
Starbucks and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Starbucks and GMS
The main advantage of trading using opposite Starbucks and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks position performs unexpectedly, GMS 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 GMS will offset losses from the drop in GMS's long position.| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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