Correlation Between RPBio and Starbucks

Can any of the company-specific risk be diversified away by investing in both RPBio 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 RPBio and Starbucks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RPBio Inc and Starbucks, you can compare the effects of market volatilities on RPBio 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 RPBio with a short position of Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of RPBio and Starbucks.

Diversification Opportunities for RPBio and Starbucks

-0.34

Correlation Coefficient

RPBio  Starbucks

Very good diversification

The 3 months correlation between RPBio and Starbucks is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding RPBio Inc and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and RPBio 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 RPBio Inc 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 RPBio i.e., RPBio and Starbucks go up and down completely randomly.

Pair Corralation between RPBio and Starbucks

Assuming the 90 days trading horizon RPBio Inc is expected to under-perform the Starbucks. In addition to that, RPBio is 1.48 times more volatile than Starbucks. It trades about -0.13 of its total potential returns per unit of risk. Starbucks is currently generating about 0.04 per unit of volatility. If you would invest  182,281  in Starbucks on October 11, 2024 and sell it today you would earn a total of  6,957  from holding Starbucks or generate 3.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

RPBio Inc  vs.  Starbucks

RPBio Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RPBio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Starbucks

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Starbucks is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RPBio and Starbucks

The main advantage of trading using opposite RPBio and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RPBio 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.

The idea behind RPBio Inc 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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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 the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.