Correlation Between Starbucks Corp and Championx Corp

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

Diversification Opportunities for Starbucks Corp and Championx Corp

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Starbucks and Championx is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks Corp and Championx Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Championx Corp and Starbucks Corp 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 Corp are associated (or correlated) with Championx Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Championx Corp has no effect on the direction of Starbucks Corp i.e., Starbucks Corp and Championx Corp go up and down completely randomly.

Pair Corralation between Starbucks Corp and Championx Corp

Given the investment horizon of 90 days Starbucks Corp is expected to generate 0.99 times more return on investment than Championx Corp. However, Starbucks Corp is 1.01 times less risky than Championx Corp. It trades about 0.32 of its potential returns per unit of risk. Championx Corp is currently generating about 0.16 per unit of risk. If you would invest  8,479  in Starbucks Corp on August 28, 2022 and sell it today you would earn a total of  1,477  from holding Starbucks Corp or generate 17.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Starbucks Corp  vs.  Championx Corp

 Performance (%) 
       Timeline  
Starbucks Corp 
Starbucks Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Starbucks Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Starbucks Price Channel

Championx Corp 
Championx Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Championx Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish technical indicators, Championx Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Championx Price Channel

Starbucks Corp and Championx Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Starbucks Corp and Championx Corp

The main advantage of trading using opposite Starbucks Corp and Championx Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks Corp position performs unexpectedly, Championx 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 Championx Corp will offset losses from the drop in Championx Corp's long position.
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The idea behind Starbucks Corp and Championx 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.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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