Correlation Between Starbucks and British American
Can any of the company-specific risk be diversified away by investing in both Starbucks and British American 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 British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and British American Tobacco, you can compare the effects of market volatilities on Starbucks and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and British American.
Diversification Opportunities for Starbucks and British American
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Starbucks and British is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Starbucks i.e., Starbucks and British American go up and down completely randomly.
Pair Corralation between Starbucks and British American
Assuming the 90 days horizon Starbucks is expected to generate 1.46 times less return on investment than British American. In addition to that, Starbucks is 2.25 times more volatile than British American Tobacco. It trades about 0.24 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.78 per unit of volatility. If you would invest 3,221 in British American Tobacco on September 4, 2024 and sell it today you would earn a total of 388.00 from holding British American Tobacco or generate 12.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Starbucks vs. British American Tobacco
Performance |
| Timeline |
| Starbucks |
| British American Tobacco |
Starbucks and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Starbucks and British American
The main advantage of trading using opposite Starbucks and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Starbucks vs. British American Tobacco | Starbucks vs. JAPAN TOBACCO UNSPADR12 | Starbucks vs. LG Display Co | Starbucks vs. Spirent Communications plc |
| British American vs. British American Tobacco | British American vs. JAPAN TOBACCO UNSPADR12 | British American vs. Imperial Brands 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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