Correlation Between United States and Starbucks
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Starbucks, you can compare the effects of market volatilities on United States 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 United States with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Starbucks.
Diversification Opportunities for United States and Starbucks
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Starbucks is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and United States 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 United States Steel 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 United States i.e., United States and Starbucks go up and down completely randomly.
Pair Corralation between United States and Starbucks
Given the investment horizon of 90 days United States is expected to generate 3.3 times less return on investment than Starbucks. In addition to that, United States is 1.12 times more volatile than Starbucks. It trades about 0.02 of its total potential returns per unit of risk. Starbucks is currently generating about 0.07 per unit of volatility. If you would invest 153,177 in Starbucks on September 1, 2024 and sell it today you would earn a total of 55,323 from holding Starbucks or generate 36.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Starbucks
Performance |
| Timeline |
| United States Steel |
| Starbucks |
United States and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Starbucks
The main advantage of trading using opposite United States and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Grupo Hotelero Santa | United States vs. Southwest Airlines | United States vs. Grupo Sports World | United States vs. Ameriprise Financial |
| Starbucks vs. DXC Technology | Starbucks vs. FibraHotel | Starbucks vs. United States Steel | Starbucks vs. New Oriental Education |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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