Correlation Between Starbucks and COMPASS GROUP
Can any of the company-specific risk be diversified away by investing in both Starbucks and COMPASS GROUP 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 COMPASS GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and COMPASS GROUP, you can compare the effects of market volatilities on Starbucks and COMPASS GROUP 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 COMPASS GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and COMPASS GROUP.
Diversification Opportunities for Starbucks and COMPASS GROUP
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Starbucks and COMPASS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and COMPASS GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMPASS GROUP 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 COMPASS GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMPASS GROUP has no effect on the direction of Starbucks i.e., Starbucks and COMPASS GROUP go up and down completely randomly.
Pair Corralation between Starbucks and COMPASS GROUP
Assuming the 90 days trading horizon Starbucks is expected to generate 1.83 times less return on investment than COMPASS GROUP. In addition to that, Starbucks is 1.52 times more volatile than COMPASS GROUP. It trades about 0.02 of its total potential returns per unit of risk. COMPASS GROUP is currently generating about 0.06 per unit of volatility. If you would invest 2,404 in COMPASS GROUP on August 31, 2024 and sell it today you would earn a total of 716.00 from holding COMPASS GROUP or generate 29.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Starbucks vs. COMPASS GROUP
Performance |
| Timeline |
| Starbucks |
| COMPASS GROUP |
Starbucks and COMPASS GROUP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Starbucks and COMPASS GROUP
The main advantage of trading using opposite Starbucks and COMPASS GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks position performs unexpectedly, COMPASS GROUP 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 COMPASS GROUP will offset losses from the drop in COMPASS GROUP's long position.| Starbucks vs. McDonalds | Starbucks vs. Starbucks | Starbucks vs. Compass Group PLC | Starbucks vs. Restaurant Brands International |
| COMPASS GROUP vs. McDonalds | COMPASS GROUP vs. Starbucks | COMPASS GROUP vs. Compass Group PLC | COMPASS GROUP vs. Restaurant Brands 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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