Correlation Between Starbucks and Emergent Biosolutions

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

Diversification Opportunities for Starbucks and Emergent Biosolutions

-0.8
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Starbucks and Emergent is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and Emergent Biosolutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emergent Biosolutions and Starbucks 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 are associated (or correlated) with Emergent Biosolutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emergent Biosolutions has no effect on the direction of Starbucks i.e., Starbucks and Emergent Biosolutions go up and down completely randomly.

Pair Corralation between Starbucks and Emergent Biosolutions

Given the investment horizon of 90 days Starbucks is expected to generate 0.26 times more return on investment than Emergent Biosolutions. However, Starbucks is 3.79 times less risky than Emergent Biosolutions. It trades about 0.34 of its potential returns per unit of risk. Emergent Biosolutions is currently generating about -0.22 per unit of risk. If you would invest  8,660  in Starbucks on September 2, 2022 and sell it today you would earn a total of  1,680  from holding Starbucks or generate 19.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Starbucks  vs.  Emergent Biosolutions

 Performance (%) 
       Timeline  
Starbucks 
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 uncertain basic indicators, Starbucks showed solid returns over the last few months and may actually be approaching a breakup point.

Starbucks Price Channel

Emergent Biosolutions 
Emergent Performance
0 of 100
Over the last 90 days Emergent Biosolutions has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2023. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Emergent Price Channel

Starbucks and Emergent Biosolutions Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Starbucks and Emergent Biosolutions

The main advantage of trading using opposite Starbucks and Emergent Biosolutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks position performs unexpectedly, Emergent Biosolutions 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 Emergent Biosolutions will offset losses from the drop in Emergent Biosolutions' long position.
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The idea behind Starbucks and Emergent Biosolutions 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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