Correlation Between Blackline and Starbucks

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Can any of the company-specific risk be diversified away by investing in both Blackline 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 Blackline and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blackline and Starbucks, you can compare the effects of market volatilities on Blackline 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 Blackline with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackline and Starbucks.

Diversification Opportunities for Blackline and Starbucks

  Correlation Coefficient

Weak diversification

The 3 months correlation between Blackline and Starbucks is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Blackline and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Blackline 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 Blackline 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 Blackline i.e., Blackline and Starbucks go up and down completely randomly.

Pair Corralation between Blackline and Starbucks

Allowing for the 90-day total investment horizon Blackline is expected to generate 2.39 times more return on investment than Starbucks. However, Blackline is 2.39 times more volatile than Starbucks. It trades about 0.29 of its potential returns per unit of risk. Starbucks is currently generating about 0.46 per unit of risk. If you would invest  4,902  in Blackline on September 4, 2022 and sell it today you would earn a total of  1,827  from holding Blackline or generate 37.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

Blackline  vs.  Starbucks

 Performance (%) 
Blackline Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Blackline are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain essential indicators, Blackline may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Blackline Price Channel

Starbucks Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish basic indicators, Starbucks showed solid returns over the last few months and may actually be approaching a breakup point.

Starbucks Price Channel

Blackline and Starbucks Volatility Contrast

   Predicted Return Density   

Pair Trading with Blackline and Starbucks

The main advantage of trading using opposite Blackline and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blackline 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.
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The idea behind Blackline 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.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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