Correlation Between Mastercard and Starbucks Corp

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

Diversification Opportunities for Mastercard and Starbucks Corp

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between Mastercard and Starbucks is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Starbucks Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks Corp and Mastercard 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 Mastercard are associated (or correlated) with Starbucks Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks Corp has no effect on the direction of Mastercard i.e., Mastercard and Starbucks Corp go up and down completely randomly.

Pair Corralation between Mastercard and Starbucks Corp

Allowing for the 90-day total investment horizon Mastercard is expected to under-perform the Starbucks Corp. But the stock apears to be less risky and, when comparing its historical volatility, Mastercard is 1.6 times less risky than Starbucks Corp. The stock trades about -0.45 of its potential returns per unit of risk. The Starbucks Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,412  in Starbucks Corp on June 30, 2022 and sell it today you would earn a total of  16.00  from holding Starbucks Corp or generate 0.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Mastercard  vs.  Starbucks Corp

 Performance (%) 
       Timeline  
Mastercard 
Mastercard Performance
0 of 100
Over the last 90 days Mastercard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Mastercard Price Channel

Starbucks Corp 
Starbucks Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Starbucks Corp may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Starbucks Price Channel

Mastercard and Starbucks Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mastercard and Starbucks Corp

The main advantage of trading using opposite Mastercard and Starbucks Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard position performs unexpectedly, Starbucks Corp 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 Corp will offset losses from the drop in Starbucks Corp's long position.
Mastercard vs. Kibush Capital Corp
The idea behind Mastercard and Starbucks Corp 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 Corp vs. Kibush Capital Corp
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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