Correlation Between Starbucks and National CineMedia
Can any of the company-specific risk be diversified away by investing in both Starbucks and National CineMedia 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 National CineMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and National CineMedia, you can compare the effects of market volatilities on Starbucks and National CineMedia 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 National CineMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and National CineMedia.
Diversification Opportunities for Starbucks and National CineMedia
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Starbucks and National is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia 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 National CineMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National CineMedia has no effect on the direction of Starbucks i.e., Starbucks and National CineMedia go up and down completely randomly.
Pair Corralation between Starbucks and National CineMedia
Given the investment horizon of 90 days Starbucks is expected to generate 0.35 times more return on investment than National CineMedia. However, Starbucks is 2.87 times less risky than National CineMedia. It trades about 0.39 of its potential returns per unit of risk. National CineMedia is currently generating about 0.03 per unit of risk. If you would invest 8,797 in Starbucks on October 21, 2024 and sell it today you would earn a total of 716.00 from holding Starbucks or generate 8.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Starbucks vs. National CineMedia
Performance |
| Timeline |
| Starbucks |
| National CineMedia |
Starbucks and National CineMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Starbucks and National CineMedia
The main advantage of trading using opposite Starbucks and National CineMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks position performs unexpectedly, National CineMedia 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 National CineMedia will offset losses from the drop in National CineMedia's long position.| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza Common | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
| National CineMedia vs. MGO Global Common | National CineMedia vs. Baosheng Media Group | National CineMedia vs. Glory Star New | National CineMedia vs. Impact Fusion International |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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