Correlation Between Starbucks Corp and International Business

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

Diversification Opportunities for Starbucks Corp and International Business

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between Starbucks and International is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks Corp and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Starbucks Corp i.e., Starbucks Corp and International Business go up and down completely randomly.

Pair Corralation between Starbucks Corp and International Business

Given the investment horizon of 90 days Starbucks Corp is expected to under-perform the International Business. In addition to that, Starbucks Corp is 1.35 times more volatile than International Business Machines. It trades about -0.03 of its total potential returns per unit of risk. International Business Machines is currently generating about 0.01 per unit of volatility. If you would invest  12,254  in International Business Machines on July 6, 2022 and sell it today you would earn a total of  296.00  from holding International Business Machines or generate 2.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Starbucks Corp  vs.  International Business Machine

 Performance (%) 
       Timeline  
Starbucks Corp 
Starbucks Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Starbucks Corp may actually be approaching a critical reversion point that can send shares even higher in November 2022.

Starbucks Price Channel

International Business 
International Performance
0 of 100
Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental drivers remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

International Price Channel

Starbucks Corp and International Business Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Starbucks Corp and International Business

The main advantage of trading using opposite Starbucks Corp and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks Corp position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.
Starbucks Corp vs. Amazon Inc
The idea behind Starbucks Corp and International Business Machines 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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