Correlation Between Starbucks and Park Ohio
Can any of the company-specific risk be diversified away by investing in both Starbucks and Park Ohio 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 Park Ohio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and Park Ohio Holdings, you can compare the effects of market volatilities on Starbucks and Park Ohio 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 Park Ohio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and Park Ohio.
Diversification Opportunities for Starbucks and Park Ohio
Poor diversification
The 3 months correlation between Starbucks and Park is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and Park Ohio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Ohio Holdings 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 Park Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Ohio Holdings has no effect on the direction of Starbucks i.e., Starbucks and Park Ohio go up and down completely randomly.
Pair Corralation between Starbucks and Park Ohio
Given the investment horizon of 90 days Starbucks is expected to generate 0.89 times more return on investment than Park Ohio. However, Starbucks is 1.12 times less risky than Park Ohio. It trades about -0.03 of its potential returns per unit of risk. Park Ohio Holdings 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 (90.00) from holding Starbucks or give up 0.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Starbucks vs. Park Ohio Holdings
Performance |
| Timeline |
| Starbucks |
| Park Ohio Holdings |
Starbucks and Park Ohio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Starbucks and Park Ohio
The main advantage of trading using opposite Starbucks and Park Ohio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks position performs unexpectedly, Park Ohio 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 Park Ohio will offset losses from the drop in Park Ohio's long position.| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
| Park Ohio vs. Hurco Companies | Park Ohio vs. Enerpac Tool Group | Park Ohio vs. China Yuchai International | Park Ohio vs. Luxfer Holdings PLC |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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