Correlation Between Weyco and Starbucks
Can any of the company-specific risk be diversified away by investing in both Weyco and Starbucks 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 Weyco and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weyco Group and Starbucks, you can compare the effects of market volatilities on Weyco and Starbucks 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 Weyco with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weyco and Starbucks.
Diversification Opportunities for Weyco and Starbucks
Good diversification
The 3 months correlation between Weyco and Starbucks is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Weyco Group and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Weyco 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 Weyco Group are associated (or correlated) with Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of Weyco i.e., Weyco and Starbucks go up and down completely randomly.
Pair Corralation between Weyco and Starbucks
Given the investment horizon of 90 days Weyco Group is expected to under-perform the Starbucks. In addition to that, Weyco is 1.91 times more volatile than Starbucks. It trades about -0.11 of its total potential returns per unit of risk. Starbucks is currently generating about 0.26 per unit of volatility. If you would invest 10,841 in Starbucks on December 1, 2024 and sell it today you would earn a total of 608.00 from holding Starbucks or generate 5.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weyco Group vs. Starbucks
Performance |
| Timeline |
| Weyco Group |
| Starbucks |
Weyco and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weyco and Starbucks
The main advantage of trading using opposite Weyco and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weyco position performs unexpectedly, Starbucks 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 Starbucks will offset losses from the drop in Starbucks' long position.The idea behind Weyco Group and Starbucks pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza Common | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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